Airtel Payments Bank, a joint venture between Bharti Airtel Ltd and Kotak Mahindra Bank Ltd, launched its service in January 2017. The aim of the joint venture was to disrupt the traditional banking system.
The payments bank decided to go about the disruption beginning with interest rates as high 7.25 per cent compared to 3-4 per cent offered by conventional banks. Besides, it announced to offer personal accidental insurance of Rs 1 lakh with every savings account and free talktime equaling the amount deposited in the payments bank-savings account.
One year later, Airtel Payments Bank has decided to slash the interest rate by basis points (BPS) to 5.5 per cent, to be effective from this Thursday, a Business Standard report said.
The payments bank justified the interest cut as an end of introductory offer and emphasised the revised interest rate is still competitive and continues to be the highest in the payments bank segment.
Paytm Payments Bank and India Post Payments Bank are the two direct competitors of Airtel Payments Bank in the segment. While Paytm Payments Bank gives a yearly rate of interest of a little over 4 per cent, India Post Payments Bank offers interest rate at 5.5 per cent.
The move by the payments bank will might leave it behind its competitors. Besides, it will also lose use cases to competitor companies which have other features that are indirectly connected to their payments banks.
In December last year, UIDAI temporarily barred Airtel and its payments banks arm to conduct Aadhaar-based SIM verification of cellular customers using eKYC process, and e-KYC of payments bank clients.
The UIDAI crackdown came into effect after allegations of Airtel using the Aadhaar-eKYC based SIM verification process to open payments bank accounts of its subscribers without their consent. Over 2.3 million customers reportedly received about Rs 47 crore in their Airtel bank accounts, which they did not know had been opened.