Paytm likely to announce launch of its bank this week

E-Wallet Paytm is finally set to announce by this week the launch of its Paytm Payments Bank Limited, two months after it got Reserve Bank of India's final approval.

E-Wallet Paytm is finally set to announce by this week the launch of its Paytm Payments Bank Limited, two months after it got Reserve Bank of India's final approval. "We will announce midweek or by the end of the week a date for the launch of the payments banks," Vijay Shekhar Sharma, founder of One97 Communications, which owns the e-wallet, told Mail Today.

The operations were originally slated to begin around Diwali. It was then pushed to February but now it appears that the launch date could be in March or even later .

Sharma has said 2017 will be the year for Paytm to expand into banking. The company will have to build distribution, reach and customer base. In August 2015, RBI gave its in-principle nod to 11 companies to start payments banks.

Tech Mahindra, Cholamandalam Finance and Dilip Shanghvi-IDFC Bank-Telenor joint venture have opted out. Of the remaining in the fray, Airtel and state-run India Post started payments banks operations on a pilot basis in November and January, respectively.

A payments bank is essentially a scaled down version of a bank. It can accept deposits up to Rs 1 lakh and pay interest on them, but cannot offer loans. While these banks will offer debit cards and ATM cards usable on ATM networks of all banks, their aim is to reach customers mainly through their mobile phones rather than physical branches.

Noida-based Paytm is yet to announce the interest rate it will offer customers on their deposits, while Airtel offers 7.25% and India Post 4.5-5.5% on savings account.

Recently, Paytm's plan to start a payments bank left users of its wallet confused about the terms of usage. Following rumours on social media, Paytm has clarified in a blog that all Paytm wallet users do not by default get an account with the payments bank. "This is just a transfer of ownership of wallet to a new company called Paytm Payments Bank Ltd.

Once we launch the bank, you will be given an option to open a separate bank account with us," the company said. It operates 160 million wallets. "If you have any balance in your current Paytm Wallet, it will reflect in your new Paytm Payments Bank Wallet. If your Wallet has been inactive for the last six months and has zero balance, it won't be transferred to the Paytm Payments Bank Wallet unless you specifically give consent for the same while logging into the app, web or by e-mail," the company added.

It also said that users are not required to open an account with Paytm Payments Bank to use the wallet. As much as 51% of Paytm Payments Bank is owned by Vijay Shekhar Sharma, and 49% by One97 Communications Last week, the wallet announced it will invest Rs 600 crore over the next 10 months to expand its QR code-based paymentsnetwork. QR code or Quick Response code is a machine-readable label with information of merchants' account details. It allows customers to transfer money instantly to the merchant's Paytm account by scanning the code with their smartphones.

The venture said it wants to add 10 million merchants enabled with these codes across 650 districts by December. According to the company, Paytm gets 65% of overall transactions on its platform through QR codes. Users particularly favoured ewallets during demonetisation as an alternative to cash and card payments. But the model's cash back system came under fire from HDFC Bank chief Aditya Puri for not being viable. However, the bank also recently appointed payments tech company In-Solutions Global (ISG) to provide an end-to-end merchant acquiring platform which will give private banks a competitive edge in pricing deals with small shops as it will not be dependent on multiple service providers.