Financial technologies player Paytm Wednesday ruled out joining the rate war in the savings account interest rate space when it launches its payments bank, instead it will focus on increasing revenue-accretive transactions. “Obviously, we do not want our customers to lose money if they are keeping their money with us, but at the same time we don’t want to fight a war on interest rates,” Shinjini Kumar, chief executive-designate of the Paytm’s payments bank venture, told reporters. Also Read - Internet down: Zomato, Paytm, Disney+ Hotstar, Amazon, Myntra, many other global services suffered massive outageAlso Read - Zomato IPO: How to invest via bank, Zerodha, and Paytm Money
Kumar, who just joined the bank from consultancy major PwC, explained that it is “counter intuitive” for a payments bank to offer higher interest rates as it has restrictions on how it uses the deposits. “It is very counter-intuitive for a payments bank to offer higher rate of interest on savings because they will just park the money. I am interested in the money that does things, I am not interested in money that sits. Money that sits is not good for me because I am not earning anything much on the float,” she said. It can be noted that payment banks are required to park 75 percent of their deposits in the safer but low yielding fixed income instruments. They are also not allowed to use their deposits for lending. Also Read - How to book COVID-19 vaccine slot via Paytm App, get Covaxin and Covishield shots with these simple steps
The comments come amid a race within the commercial banks to woo customers with higher interest rates on savings accounts, through which they target to forge sticky relationships that also helps cross-sell other financial products. Foreign lender DBS Bank recently launched a product offering 7.1 percent without any ceiling on the quantum, while private sector lender Kotak Mahindra Bank said it will continue with the 6 percent interest rate. Yes Bank also offers similar interest rates on deposits of over Rs. 1 lakh.
Kumar said 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 said the Chinese online retailer Alibaba-backed company wishes to launch its payments bank by August, within a year of its founder Vijay Shekhar Sharma being given the in-principle nod by the Reserve Bank to enter the fray. Kumar said there are a couple of things to be sorted out before it gets the final nod from the RBI, but exuded confidence that it should not witness any problems.