5 things to know before putting money in a payments bank

Payments banks are stripped down versions of banks that have existed for many decades. The Reserve Bank of India, in 2015, gave licences 11 companies, including Reliance Industries, Aditya Birla Nuvo, Paytm, Airtel and Vodafone, to open payments bank.

Image result for how airtel payment bank works

The banks are aimed to reach out to the unbanked population of the country, many of which live in very small towns and villages.

1.Mobile banks: In its true sense, the payments banks will be mobile only banks, which mean they will not have full-fledged branches like an SBI, ICICI Bank or HDFC Bank. The account holders will be able to operate their accounts using the mobile app.

2.Small savings and small loans: Up to Rs 1 lakh of deposits can be made in a payments bank account. Also, the bank will be able to give loans up to Rs 1 lakh, especially targeted at small merchants.

3.ATM and debit cards: The cards issued by the payments bank can be used across the banking network and at any bank’s ATM for cash withdrawal.

4.Mobile services: It allows transfers and remittances through the mobile, offers services such as automatic payments of bills, cashless purchases, chequeless transactions through a phone, and money transfer directly to bank accounts at nearly no cost being a part of the gateway that connects banks.

5.Saving account and interest: Like any normal bank account, the payments bank account holder will earn interest on the balance in their savings account. For example, Airtel offers 7.25% to savings account holder. The interest are expected to be higher as the bank has less infrastructure cost.