Jack of all trades mobile payments-turned-eCommerce portal-turned financial technology player Paytm in its recently made announcement had said that it is not in the league of the rate war which is going in the savings account interest rate spectrum. Soon after the Noida-based payment fir announced its plans to enter into payments bank, the industry went gaga and started speculating on how it can challenge banks. But being keen on its work mechanism, Paytm has said that it will focus only on increasing its accretive transactions through the payments bank feature.
As per Shinjini Kumar, a chief executive designate of Paytm’s payments bank unit, the company has no intention in a fight war on interest rates and will rather focus on helping consumers not to lose money if they are keeping it in Paytm wallet.
Kumar is an ex PwC employee and while talking to media about the same he explained that it is ‘counter intuitive’ for payments bank to offer high interest rates as it has restrictions on how its uses the deposits.
Approval of payments bank services have been given on a condition that asks companies to park 75 per cent of their deposits in the safer. They are also not allowed to use their deposits for lending or any of such purposes.
The talking picked up fire when commercial banks started a race within themselves to lure consumers with higher interest rates on savings accounts. Through this, they stared targeting sticky relationships that also help cross-selling for other financial products.
Many Indian and even foreign lending and banking institutions have come up with offerings as high as 7 per cent without any ceiling on the quantum. Even Indian banks such as Kotak Mahindra and Yes Bank offers similar interest rates.
The aim of the forthcoming payments bank is to solve the "friction" in banking through newer, innovative strategies and get more people into the banking fold, Kumar added.