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Service Charges by Payment Banks
How differentiated are these?
Are payment banks different from the regular banks? Who are their primary target customers?
Remember that these banks were conceptualized by Reserve Bank of India (RBI) as ‘differentiated
banks to serve niche interests’, the niche here being farmers, migrant labourers, low-income
households, small businesses and the unorganized sector. These banks were to offer savings
accounts and remittance services with a low transaction cost. The hope also was that the poorer
citizens (who transacted only in cash) would be encouraged and enabled to take their first step
into formal banking. The following report assesses the service-charge component by comparing
five payment banks on basic parameters. This will also give us a clear picture of the basic
banking services that these banks provide.
Subas Tiwari & Gopal Ravi Kumar
F
or our comparative study on the charges they chosen these banks based on product offer (gathered
levy for various services, we have chosen from their websites and brochures) and services
five payment banks that provide detailed rendered (feedback from consumers).
information on their websites. We have The parameters on which we have compared
32 •
In the News
Service Charges by Payment Banks
them include account-opening fee, minimum first
(initial) cash deposit, cash deposit/load cash fee,
cash-withdrawal fee, maximum cash withdrawal
limit, fund-transfer fee, monthly average balance,
charges for non-maintenance of monthly average
balance (MAB), savings bank (SB) interest per
annum, debit card issuance fee and replacement fee,
PIN generation/change charge, maximum NEFT
and IMPS allowed, charges for SMS alerts, physical
statements fee, cheque-return charge, and charges
for account closure within six months. We gave the
highest weightage (15 points) to consumer feedback,
which also helped in determining the most important
and beneficial variables. These variables have a direct
bearing on the product structure.
CV RECOMMENDATIONS
Best Buy
India Post (Sugam Account)
Good Buy
Paytm
Fair Buy
Fino (Pratham Savings)
CONSUMER VOICE september 2018 • 33
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BFSI
Service Charges by Payment Banks:
CV Weightage India Post (Sugam
Service
Points (100) Account)
3 Account-opening fee NS (0)
2 Cash deposit/Load cash fee NS (0)
10 Cash-withdrawal fee (%) NS (0)
3 Fund-transfer fee (%) NS (0)
7 Minimum first (initial) cash deposit (Rs.) Nil (7)
2 Maximum cash withdrawal limit (pm) NS (0)
3 Maximum NEFT (Rs) 100,000 (1)
3 Maximum IMPS (Rs) 100,000 (1)
10 SB interest per annum (%) 5.50 (10)
3 Free personal accident cover (Rs, in lakh) NS (0)
2 Monthly average balance (Rs) Nil (2)
7 Non-maintenance of MAB (Rs) Nil (7)
7 Debit card issuance fee (Rs) Free (7)
3 Debit card replacement fee (Rs) 100 (2)
4 PIN generation/change charge (Rs) 50 (1)
6 Physical statements fee (Rs) Free (6)
3 SMS alerts (Rs, per month) Free (3)
3 Cheque-return charge (Rs) NS (0)
4 Account closure within 6 months (Rs) 250 (4)
15 Consumer feedback 12
Total 100 63
Notes:
a) NS: Not specified
b) Information given here has been sourced from websites and brochures.
34 •
In the News
Service Charges by Payment Banks
A Comparative Chart
Fino (Pratham
Paytm Airtel Aditya Birla
Savings)
NS (0) NS (0) Free (3) Free (3)
Free (2) NS (0) Free (2) NS (0)
20 per transaction (10) 0.50 (7) 0.65 (4) 0.85 (1)
NS (0) NS (0) 1.00 (3) 2.50 (1)
NS (0) 1000 (1) 100 (5) 500 (3)
NS (0) 25,000 (2) 25,000 (2) 25,000 (2)
No limit (3) NS (0) 100,000 (1) NS (0)
No limit (3) NS (0) 100,000 (1) 200,000 (2)
4.00 (5) 4.00 (5) 5.50 (10) 4.00 (5)
NS (0) 1.00 (3) 1.00 (3) NS (0)
Nil (2) 1000 (1) NS (0) Nil (2)
Nil (7) 50 (3) NS (0) Nil (7)
125 (2) 149 (1) NS (0) 75 (4)
125 (1) 149 (1) NS (0) 75 (3)
8 (2) 10 (2) NS (0) Nil (4)
8 (4) 10 (4) NS (0) 50 (1)
Free (3) 5 (1) NS (0) NS (0)
NS (0) 250 (3) NS (0) NS (0)
NS (0) 250 (4) NS (0) NS (0)
11 8 10 4
55 46 44 42
c) Charges for services described differently in nomenclature are grouped under major heads.
d) Minimal charges are taken for individual SB accounts in banks based in metros.
e) In many banks, GST is included/excluded in the service charges and is therefore not specified here.
CONSUMER VOICE september 2018 • 35
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BFSI
Certainly payment banks have the potential technology-enabled. The customer acquisition
to play an important part in bringing untouched and servicing cost structures of payments banks
rural areas under the banking system. They perform may not follow those of a traditional bank.
almost all standard banking operations – they accept • The offering is very niche and does not cover
demand deposits (up to Rs 1 lakh), offer remittance the whole gamut of banking services. An
services, mobile payments/transfers/purchases and accountholder at a payment bank may still need
other banking services like ATM/debit cards, net to go to another full-service bank to meet some of
banking and third-party fund transfers. Of course they their banking needs.
function on a rather smaller business scale compared
• The new KYC norms for payment banks are stringent
with other banks and also do not have the mandate
– they have to now get their customers’ information
to extend loans.
verified by third parties. RBI had earlier accepted
How things pan out will depend on how well Aadhaar-based eKYC as a means for customer
payment banks meet the challenges that are now authentication at the time of opening accounts.
coming to the fore.
• The old norms also allowed KYC done for mobile
• A lot will depend upon the volume of business. connections to be extended to opening bank
However, customer acquisition is not going to accounts. This allowed telecom operators with
be a cakewalk since even other normal banks are payment bank licenses to provide bank accounts
vying for the same lot. So, yes, the competition is to all of their existing customers with minimum
getting tougher. effort and no extra cost. Payment banks may not
have the same level of manpower to collect paper-
A payment bank may be defined as a ‘non- based KYC as traditional banks.
full-service niche bank’. It can only open • The maximum cap for holding one’s money in a
demand deposits (current and savings deposit payment bank needs to be enhanced to at least
accounts) and provide remittances. It is Rs 500,000 to enable traders and small businesses
expected to reach customers mainly through as well as salaried/self-employed individuals to
their mobile phones rather than traditional utilize the banking services to the optimum.
bank branches. • The deposit insurance cover, which is at present
capped at Rs 100,000 per depositor, also needs to be
• Depending on volume also means that the suitably enhanced to provide additional insurance
model should focus on being cost-effective and cover and enhance the credibility factor.
36 •
In the News
Service Charges by Payment Banks
What They Are Allowed to Do Within These Limitations
• They can accept cash and effect cash payments to • Presently, cash transaction is limited to Rs
customers. 100,000 per customer. (Payment banks will
• They can accept demand deposits – that is, current initially be restricted to holding a maximum
deposits and savings bank deposits. balance of Rs 100,000 per individual customer,
as per RBI press release dated 27.11.2014.)
• They can extend debit card facility.
• Payment banks are not authorised to open
• They can effect money transactions on electronic
recurring deposits and fixed deposits (time
platforms such as ECS, NEFT and RTGS.
deposits).
• They can undertake utility-bill payments on behalf of
• They cannot issue credit cards.
customers and the general public.
• They cannot undertake any lending activity.
• They can act as business correspondents (BCs) of another
bank/entity subject to RBI norms on such activity. • No NRI deposits should be accepted.
• They can open their branches and ATMs, and offer
internet banking and other non-risk-sharing simple
financial services activities not requiring any commitment
of their own funds (such as distribution of mutual funds,
units, insurance products, pension products, etc.) ,subject
to prior approval of the RBI and after complying with the
requirements of the sectoral regulators for such products.
CONSUMER VOICE september 2018 • 37
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BFSI
In 2013, in its policy discussion paper on Banking Structure in India – The Way Forward, Reserve Bank
of India enunciated that there was a need for niche banking in India, and differentiated licensing could
be a desirable step in this direction, particularly for infrastructure financing, wholesale banking and retail
banking.
In response to RBI’s call for applications for payment bank licenses, 41 entities had applied. On 19
August 2015, RBI gave in-principle licenses to 11 of them to launch payments banks: 1) Aditya Birla
Nuvo, 2) Airtel M Commerce Services, 3) Cholamandalam Distribution Services, 4) Department of
Posts, 5) Fino PayTech, 6) National Securities Depository, 7) Reliance Industries, 8) Dilip Shanghvi
(founder of Sun Pharmaceuticals), 9) Vijay Shekhar Sharma (CEO of Paytm), 10) Tech Mahindra, and
11) Vodafone M-Pesa.
Within a period of 18 months starting 19 August 2015, they were expected to comply with the
conditions regarding paid-up equity capital (minimum Rs 100 crore) and the promoter’s minimum initial
contribution to the paid-up equity capital (shall be at least 40 per cent for the first five years from
the commencement of business). Additionally, 26 per cent of the paid-up capital will be held at all
times by resident Indians. NRIs’ holding can be allowed up to 24 per cent of the total paid up capital.
The operations of the bank should be fully networked and technology-driven, conforming to generally
accepted standards and norms. Last but not the least, a customer grievances cell must be in place. Only
after conforming to these requirements could the aforementioned entities become eligible to approach
RBI to obtain a regular license/approval for commencement of banking business.
Out of the chosen 11, 3 entities reportedly surrendered their in-principle license. There is no information
on the RBI website regarding the ‘fate’ of three other entities, thereby leaving only five players in the
field (refer to the Product Comparison Chart).
38 •
