Airtel Payments Bank reported deposits of Rs 68.33 crore at the end of the financial year ended 31st March 2017, which was its first year of operation, according to its annual report. Its top 20 depositors account for around Rs 20.45 lakh (around 0.3% of total deposits), which is probably a function the Reserve Bank of India limiting deposits in Payments Banks to Rs 1 lakh. For HDFC Bank Ltd, for example, this number was 9.32% in FY17. More on the Payments Banks operating guidelines here.

It’s worth noting, though, that the Airtel Payments Bank hasn’t been around for the full financial year: it had launched as a pilot in November 2016, starting with 10,000 outlets in Rajasthan. Subsequently it became the first payments bank to roll out services nationally. Airtel will use its telecom retail network in towns and villages to open bank accounts. Airtel has been incentivising its customers to sign up for the payments bank by giving a minute of telecom talk time for each rupee deposited (albeit with a limited validity).

Airtel Payments Bank financials

In its annual report, Bharti Airtel Ltd notes that the turnover for Airtel Payments Bank in FY16 was Rs 395 million (Rs 39.6 crore), and in FY17, was Rs 264 million (Rs 26.4 crore). We checked with Airtel for a clarification regarding how revenue reduced in a year that the payments bank became operational. In response, an Airtel representative said that

“The financial reporting standard for Airtel Payments Bank (formerly Airtel M-commerce Ltd) changed from Companies Act in FY 16 to Banking Regulation Act in FY 17. The turnovers have been stated as per the respective regulation and are not comparable.”

From the Airtel Payments Bank annual report, which the Bharti Airtel representative pointed us towards:

In Airtel’s recent earnings (Q417) conference call, Gopal Vittal, Joint MD and CEO (India & South Asia) of Bharti Airtel, said that

A lot of the costs that we are incurring is acquisition cost and marketing cost. We ran a big campaign last quarter, which therefore was run on payments bank and that was the large cost. We have also put up whole bunch of shop boards and dealer boards across the several banking points that we have and finally of course there are sales and distribution costs, which are really related to the acquisition costs.

Digital Bank

Payments banks are allowed to issue debit cards, but Airtel is not going to do that. There are currently over 700 million debit cards in circulation and is the second largest payment instrument in circulation after cash, but their primary use-case so far has been to withdraw cash. More on why Airtel’s decided to not issue physical debit cards here. In comparison, Paytm charges an annual fee for issuing debit cards, and withdrawals of cash from ATM machines.

Telecom and Payments

Bharti Airtel owns 80.10% in Airtel Payments Bank, while Kotak Mahindra Bank holds the remaining 19.90%. Payments is now a battleground for telecom operators and Telecom VAS companies, with telecom operators like Airtel, Reliance Jio and Idea Cellular setting up a payments bank, as has VAS company One97 and its founder Vijay Shekhar Sharma, under the Paytm brand. Spice Digital is another key VAS company to get a mobile wallet license. Remember that for many years, the RBI kept telecom operators out of the payments business, to the advantage of banks. A bank account with every mobile connection was talked about as long ago as 2008.

What Payments Banks can and cannot do

Payments Banks are banks whose operations are significantly limited, as compared to traditional banks, and cannot lend money, take NRI deposits, issue credit cards or set up non-banking-financial businesses: