Leading digital payments player, Paytm, founded by Vijay Shekhar Sharma, is launching its payments bank service on May 23. With its new service, Paytm is planning to merge the existing e-wallet into the payments bank. So how does it work? What should you know as a Paytm user?
Interest and debit cards like regular bank
The functioning of Paytm Payments Bank is more or less like a normal bank adhering to the regulations of the Reserve Bank of India, with a few exceptions. It offers services like a bank account, interest on the deposited money, money transfer facilities and debit cards. Currently, payments bank offers 4% interest rate on savings account. There are no charges for online fund transfer which is provided through various services like Immediate Payment Service (IMPS), Unified Payment Interface (UPI) and National Electronic Fund Transfer (NEFT). The new bank will also manage the existing wallet system besides helping customers open separate permanent bank accounts.
Paytm wallets will now be managed by payments bank
All the existing e-wallet accounts, except for a few, will be transferred automatically to the separate wallet managed by the payments bank. The exception includes zero balance accounts that have been inactive for more than six months. Users who fall under this category have to give their consent over the app, web or email for the conversion.
Interest only if wallet converted to bank account
The wallet managed by payments bank will not provide interest on the deposited money unless the user opens an account. However, a user can choose not to open a bank account and without incurring any fee, his existing e-wallet will be transferred to the wallet under the payments bank. This will also be reflected in Paytm app. It will retain and perform the same function as it does as before the merger. “The Log-in details, wallet balance and user experience will remain the same,” Paytm said in a blog post.
To avail interest on the money deposited and to get other financial services, the users have to open an account. The bank account and wallet remain as independent services.
Follows RBI rules, KYC compliance
The users can open new bank accounts by providing the information specified by RBI. As per its guidelines, the users will have to submit Know Your Customer (KYC) documents like Aadhaar and PAN. With the new accounts, they will be getting virtual debit card, passbook, cheque book and other benefits. Unlike the wallet which is also managed by payments bank, the bank account holders can transfer their money to any bank account.
How a payment bank differs from a regular bank
A payments bank doesn’t offer the same services as a usual bank. The payments bank account is permitted to only hold a maximum of Rs 1 lakh deposit. The maximum limit of transaction in a month is also restricted to Rs 1 lakh if KYC is registered and Rs 20,000 if KYC is not registered. Besides, it cannot offer loans or credit cards to their users, as of now. There is no minimum balance requirement for the payments bank
Cash withdrawal charges of payments bank
If you withdraw cash at an ATM from Paytm Payments Bank account, you will be charged a fee that is similar to what other major banks levy. Users from non-metro cities will get five free transactions while those from metro cities will get only three free withdrawals, after which the user will be charged Rs 20 for each cash withdrawal and Rs 5 for non-financial transactions. A user can also get a physical statement from the bank by paying Rs 50 plus service tax and delivery charges.
Debit card charges
The payments bank provides Rupay debit cards to users at an annual subscription fee of Rs 100 plus delivery charges. An account holder will have to pay an amount of Rs 100 plus delivery charge to get the card replaced if the card is lost. Account holders can also get a cheque book of 10 cheque leaves by paying Rs 100 plus delivery charges.
Opting out? What happens to your wallet balance?
Paytm users were given an option of discontinuing their wallet services altogether before May 23 by sending an email to help@paytm.com. The wallet amount will be redeemed by one time transfer to the bank account details provided by the users. The account details have to be provided within 15 days of notifying the choice. If a user has failed to provide the details within the specified time, the wallet amount will be kept in a specially designated account with Paytm payments bank and the funds will be available once the bank details are provided.
With the payments bank, which widens the scope of financial services it provides, Paytm’s parent firm One97 Communications is targeting 300 million new customers compared to the existing 200 million customers. The current vice-president of business at Paytm, Renu Satti has been appointed as CEO of the Paytm Payments Bank to take forward the business.