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Airtel Payments Bank slashes interest rate to 5.5%

Photo showing an Airtel board atop a shop

Airtel Payments Bank has slashed its interest rate on deposits by 175 basis points (bps) from 7.25% to 5.5%, effective Thursday.

According to a report on Business Standard, the company said it was trying to keep rates competitive and was keeping it higher than or at par with the competition.

An Airtel Payments Bank spokesperson told Business Standard that the 7.25% interest rate was an introductory offer. Currently Paytm Payments Bank offers an annual interest rate of 4%, India Post Payments Bank has kept the rate at 5.5%.

Airtel eKYC suspension

December suspended Airtel and Airtel Payments Bank from conducting Aadhaar-based verification of customers. This was due to complaints that the telecom company had used the Aadhaar-eKYC based SIM verification process to open payments bank accounts of its subscribers without taking their ‘informed consent’. Such accounts were also linked to get subsidies from the government.

UIDAI, while suspending the e-KYC licence, had imposed a fine of Rs 2.5 crore on the payments bank. Partial e-KYC was then restored for Airtel but only limited to sim verifications.

Timeline of events leading to suspension:

  • In late September 2017, it was reported that Airtel Payments Bank had opened bank accounts without the informed consent of its customers and receives a notice from UIDAI.
  • In November 2017, following up on several consumer complaints regarding non-credit of LPG subsidies the Ministry of Petroleum and Natural Gas said that it learnt that the subsidies had been credited their Airtel Payments Bank accounts instead. A sum of over Rs 47 crore was said to have been transacted into the payments bank as part of LPG subsidies.
  • In December 2017, Airtel deposited an interim penalty of Rs 2.5 crore with the Aadhaar-issuing body UIDAI. The company also assured that it will return the Rs 190 crore that had come into the ‘unsolicited’ payments bank accounts of 31 lakh mobile subscribers.
  • Also in December 2017, following the entire fiasco Airtel Payments Bank CEO Shashi Arora resigned from his position.
  • On December 22, partial eKYC was restored for Airtel by the UIDAI. UIDAI will only allow mobile SIM KYC through Aadhaar and will not allow the same for opening bank accounts
  • On January 8, it was reported that the company had terminated relationships with over a 1000 retailers and fined others for not following the proper process while signing up customers.

Overhauled KYC process by RBI

The Reserve Bank of India issued new guidelines for payments bank to get their customers’ information verified by third parties.

This appears to have been done as an attempt to prevent the sort of “piggybacking” that was seen with the Airtel Payments Banks accounts being opened with a barely noticed pre-ticked box. This was enabled by the previous guidelines that explicitly allowed the reuse of the authentication done by telecom companies by the associated Payments Bank – possibly with an intent to simplify account opening – without explicitly forbidding it.

Sources at Airtel told Business Standard that the cost of acquisition of customers will go up for the telecom player, already finding it hard to get account holders for its bank. “Earlier, the retailer doing eKYC for mobile connection was also doing KYC for the payments bank of Airtel. However, after the new norms from RBI, a separate process for KYC needs to follow for the payments bank,” the source reportedly said.

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