With 4pc interest, how does Paytm’s payments bank stack up against competition?

Paytm's much-awaited payments bank is now operational, allowing customers to open savings accounts with a total deposit amount of up to Rs 1 lakh.

For the moment, the service is available by invitation only. According to the company blog, in the first phase, Paytm will roll out the limited version of the banking app for its employees and associates.

The blog also confirms offering an annual interest of four percent for all savings accounts, with their merchant partners having access to their current bank accounts.

This is a bit low when compared to its competitors, Airtel Payments Bank (APB) and India Post Payments Bank (IPPB) which offer interest rates of 7.25 percent p.a. and 5.5 percent p.a. respectively, although IPPB offers an interest rate of 4.5 percent on deposits up to Rs 25,000.

Media reports also suggest that Paytm Payments Bank (PPB) will offer Rs 250 cashback to customers depositing Rs 25,000 to their payments bank accounts.

According to RBI guidelines, PPB can offer other banking services like debit cards, online banking, and mobile banking. The company will be issuing RuPay debit cards to consumers who open saving accounts with the bank.

Comparing the charges

The bank's customers will get five free transactions in non-metro cities and three free transactions in metros. Crossing this limit, customers will be charged Rs 20 for each cash withdrawal and Rs 5 for non-financial transactions like taking out a mini-statement.

IPPB gives similar benefits—three free withdrawals in metros and five in non-metros, levying Rs 20 post that, while APB charges 0.65 percent of the amount transferred as a fee for cash withdrawal.

All online fund transfers with PPB are free, claims the company, while IPPB looks at charging consumers Rs 2.50– Rs 5 for NEFT or IMPS at bank branches. As a fee, APB charges 0.5 percent of the amount transferred.

Additional costs with PPB include Rs 100 and additional charges for doorstep delivery of debit cards. The bank also claims to have zero charges for minimum balance.

Speaking on the occasion, Vijay Shekhar Sharma, Chairman, PPB, stated that,

"RBI has given us an opportunity to create a new kind of banking model in the world. We are proud that our customer deposits will be safely invested in government bonds and used for nation building. None of our deposits will be converted into risky assets."

Just last week, the company had raised a massive investment of $1.4 billion from Japanese conglomerate SoftBank. The funds were then stated to be used for increasing the customer base and launching a slew of financial products involving wealth management, deposits, and money lending.