Paytm launches payments bank, to offer cashbacks on deposits

India's largest digital wallet firm Paytm on Tuesday launched the third payments bank in the country after Bharti Airtel and India Post.

One97 Communications Pvt Ltd, the holding company of Paytm will invest Rs 400 crore initially into the bank.

The firm aims to acquire 500 million customers in the next three years and will offer an interest rate of 4 percent per annum on deposits.

The first physical branch of the bank has been opened in Noida. The Paytm Payments Bank aims to open 31 branches and 3,000 customer service points in its first year of operations, the company said.

The payments bank will offer cashbacks on deposits, and will charge zero fee for online transactions.

The company's current vice-president business, Renu Satti, has been named as the chief executive officer of Paytm Payments Bank.

Satti has worked with Paytm for around ten years. After starting out as human resources manager at One97 Communications, Satti went on to become company's vice-president, business.

One97 Communications founder and CEO Vijay Shekhar Sharma has said all active wallet accounts on the payments app will be transferred to the payments bank.

In 2015, the Reserve Bank of India gave approval to 11 applicants including Paytm to set up payments bank.

In January, Bharti Airtel and Kotak Mahindra Bank announced the launch of Airtel Payments Banks, a joint venture between the two companies. The payments bank offered an interest rate of 7.25 per cent on savings account.

India Post opened its payments bank in January 2017. The first two branches of the bank were opened in Ranchi and Raipur.

The bank offers an interest rate of 4.5 percent on deposits up to Rs 25,000, 5% on deposits of Rs 25,000-50,000 and 5.5% on Rs 50,000-100,000.

India Post Payment Bank (IPPB) is planning mega expansion to open 650 branches this year.

Payments banks can accept deposits of up to Rs 1 lakh per account from individuals and small businesses. To deepen financial inclusion in the country, RBI had allowed small finance banks and payments banks to start services.

A payments bank is an institution that can take deposits and remittances but cannot lend.