Airtel Payments Bank is expanding its distribution network with a strategic partnership with Hindustan Petroleum Corporation Limited (HPCL). Through this, customers will be able to access banking services such as opening bank accounts, money transfers, cash deposits and withdrawals at 14,000 fuel stations.

Airtel began its payments bank operations 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.

Interestingly, rival payments bank Fino had signed a MoU with Bharat Petroleum Corporation Limited (BPCL), which owns a 21% stake in Fino, to set up a digital banking and payments ecosystem using BPCL outlets in six states – Uttar Pradesh, Madhya Pradesh, Bihar, Rajasthan, Tamil Nadu and Maharashtra – as banking correspondent points.

Digital bank and MDR

Airtel Payments Bank mentions that customers will not be charged for digital transactions and that makes sense considering that they are trying to be a purely digital bank. Note that payments banks are allowed to issue physical debit cards but Airtel has opted not to issue them to customers. Instead, they will get an online virtual card which can be used for purchases.

It is unclear if the merchant discount rate (MDR), an interbank exchange fee levied on merchants, will apply for these virtual debit cards. The Reserve Bank of India (RBI) is currently looking at a differentiated MDR between acquiring infrastructure involving physical terminals (POS machines, mPOS etc) and digital acceptance infrastructure models. The RBI will also decide MDR for debit cards for petrol/fuel purchases after an industry consultation process with Oil Ministry. More on that here.

Financials

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. It’s top 20 depositors accounted 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.