Interest rate over 7% unsustainable: Fino Paytech

Fino was one among the 11 entities given in-principle nod to start payments bank by RBI in Aug 2015

The high interest rate of over 7 per cent because of competition is unsustainable, Fino Paytech has said, stating clearly that it will not join the interest rate war for customer acquisition but focus on profitability once it launches its payments bank.

"We do not subscribe to high interest rates and free offers and feel that the business has to make sense. We are sure people also understand that these are not sustainable and are short-term ploys," Fino Paytech MD and CEO Rishi Gupta told PTI.

He was fielding a query about Airtel's venture, which has become the first operational payments bank offering an interest rate of 7.25 per cent on deposits.

Gupta said interest rates are on way down and there is a negative return because the government securities in which 75 per cent of deposits need to be invested are yielding 6.3 per cent. There are also costs of operations additionally, he pointed out.

"Fino, which applied for the final licence, is hopeful of launching its payments bank in the next 2-3 months with a network of 40,000 touchpoints and 400 branches," he added.

The company already has 20,000 touchpoints through its legacy business correspondent network through which it serves universal banks, he said, adding that 10,000 additional points will come up through its strategic partners, including oil marketing company BPCL while it is putting up an additional 10,000 points.

The touchpoints will operate through hand-held devices while the branches will be manned by up to four people each and spread across 300 square feet.

Many of the branches are already running, but it is expanding headcount and the space, Gupta said. The company will also look at scaling up the recently-launched wallet service in the run-up to the bank launch.

Earlier this week, it announced fund-raising of Rs 149 crore from ICICI Bank's insurance arms and two unnamed investors, clearing the decks for it to seek RBI's final nod as it becomes a majority domestic investor-owned entity.

Other investors in the payments bank include BPCL, Blackstone, Intel Capital, HSBC, ICICI Bank, BPCL, IFC, Corporation Bank, Indian Bank, Union Bank of India and Headland Capital Partners.

Fino, which had been operating as a business correspondent, was one among the 11 entities given in-principle nod to start a payments bank by RBI in August 2015.

Other successful entrants included corporate houses Reliance Industries, Aditya Birla Group, the Mahindras, and telecom firms like Vodafone's M-Pesa and Airtel. Three applicants, including Mahindra, Cholamandalam and pharma entrepreneur Dilip Shanghvi, have backed out mid-way.