Will not fight interest rate war with banks on Casa front: Paytm

The mobile wallet player has been granted the in-principle approval for launching payments bank

Paytm, the mobile wallet player that has been granted in-principle approval for a payments banks, has ruled out an interest rate war on the savings rate front to win over customers.

“I am not a Casa (current account and savings account) hunter at all,” said Shinjini Kumar, chief executive-designate of Paytm's payments bank venture. “We are not fighting the war for Casa based on interest rate. I want people to understand that that is not the game. How good are idle balances to me? So we will offer an interest rate similar to what the rest of the market does.”

The company will be applying to the Reserve Bank of India in the coming days to get the final licence and is expecting to start business by September-October.

Kumar said instead of chasing deposits, they would look at increasing fee income from merchants, consumers and third party distribution income.

Payments banks are allowed to provide small savings accounts and payments/remittance services. They are also permitted to accept deposits of up to Rs 1 lakh but cannot lend or issue credit cards. Also, these niche banks need to park 75 per cent of their deposits in the safer but low-yielding fixed income instruments. The banks’ promoters believe that chasing deposits will not really be a lucrative option.

Kumar also explained that as of now the focus was on achieving scale of business to succeed and not on chasing profitability. Considering that payments banks will mainly be a low-margin and high-volume business, it is important to have a large user base. Paytm expects to leverage on its current user base of 126 million.

As the company already has an idea of the customer’s credit behaviour through the purchases made via the wallet, it will look at using this data and offer services based on it. However, it is yet to get an approval from the regulator on if it can migrate the customer base to its payments banks.

The dynamics of the business has come under question after three players — Tech Mahindra, Cholamandalam Investment and Finance Co and a consortium of Dilip Shanghvi, IDFC Bank and Telenor Financial Services — announced they would not be pursuing their plans of opening a payments bank.

Kumar is not perturbed by other players dropping out of the race and explained that this was because this was not their core business, which is not the case for Paytm.