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India's largest mobile wallet app Paytm gets regulatory nod to operate its own Payments Bank



India’s largest mobile wallet service now has its own payments bank.

Paytm announced today it has received regulatory approval from the Reserve Bank of India for launching Paytm Payments Bank, a move that “changes everything” for the company. 

“Our aim is to build a new business model in banking industry, focussed on bringing financial services to 100s of millions of un-served or underserved Indians,” said founder and CEO of Paytm, Vijay Shekhar Sharma. 

“With power of technology and innovation-at-scale, we aim to become a benchmark in world of banking,” he added, stating his intentions of taking full-time executive role in the Bank.  

The “Payment Banks” is an initiative from the Indian government, first unveiled in 2014, that cuts the need of going to traditional branches and makes nearly every bank operation accessible from a smartphone. Through this move, the government seeks to bring digital banking services to much of the country’s unbanked population. 

Having Payments Bank could allow Paytm to address some of the roadblocks that have held the service back from becoming more appealing to people.

In 2015, it gave an in-principle approval to 11 of the 41 applicants, with Paytm being one of them, to open their Payments Bank. The government has also put some limitations on such banks. Accounts in payments bank can only have Rs 100,000 ($1,500) at any given point of time. Moreover, these banks can’t offer loans or issue credit cards, but can issue debit cards.

Airtel, India’s largest telecom operator launched its Payments Bank — albeit in pilot phase — in November, the first in the country.  

For Paytm, which has over 170 million active users, having Payments Bank will allow it to address some of the roadblocks that have held the service back from growing faster and becoming more appealing to people. 

With Payments Bank, a Paytm customer will be able to use the mobile wallet at every place, even those who previously didn’t accept the service. It will also make it easier for customers to convert that money into cash, if Paytm launches debit cards. 

Also importantly, Paytm could offer users interest on their parked cash on the wallet, making the service more lucrative to customers. Airtel Payments Bank, for instance, offers users 7.25 percent interest per annum on savings account deposits. This is higher than 4 percent interest rate on deposits that most public and private sector banks offer. 

“We have sorted payment on wallet and we want to leverage that. We will drive and scale up payments business even today, while others have to build payments business,”Sharma said in 2015

Though Sharma didn’t share more information today, he has previously said One97 Communications, the parent company of Paytm, will merge the mobile wallet service into the Paytm Payments Bank. 

The company also plans to make it seamless for Paytm users to have an account on Paytm Payments Bank, suggesting that it could be automatic, though those who don’t wish to be enrolled will get an option to opt out. 

In an interview last year, Sharma said he has invested Rs 1.120 billion ($16.7 million) of his own money in the Payments Bank and holds a majority stake in it. 

Moving forward, Payments Bank have the potential of bridging the last mile, reaching every place where smartphones are. As they begin to gain traction, they will pose competition to traditional banks, forcing them to make their services as accessible and user friendly. 





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