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India telecom firm launches first 'stripped down' bank India's first 'stripped down' bank
(35 minutes later)
Telecom company Airtel launched a pilot of India's first payment bank service on Thursday. The BBC's Suranjana Tewari explains how this new "stripped down" version of banking will work. Telecom company Airtel launched a pilot of India's first payment bank service on Thursday. The move comes two weeks after the Indian government decided to ban 86% of the currency in circulation in a bid to crack down on corruption.
The move comes two weeks after India's government's decision to ban 86% of the currency in circulation in a bid to crack down on corruption. The BBC's Suranjana Tewari explains how this new "stripped down" version of banking will work.
Why India wiped out 86% of its cashWhy India wiped out 86% of its cash
Meet the 'money mules' of India's cash crisisMeet the 'money mules' of India's cash crisis
India's cash crisis explainedIndia's cash crisis explained
What are payment banks?What are payment banks?
Payments banks are a stripped down model conceptualised by India's central bank, the Reserve Bank of India.Payments banks are a stripped down model conceptualised by India's central bank, the Reserve Bank of India.
They accept deposits of up to around $1450, and can offer both current and savings accounts.They accept deposits of up to around $1450, and can offer both current and savings accounts.
Using mobile phones, they allow for transfers and withdrawals, effectively a cheaper way of reaching rural citizens than building bank branches in every village.Using mobile phones, they allow for transfers and withdrawals, effectively a cheaper way of reaching rural citizens than building bank branches in every village.
They can issue ATM cards, debit cards, online banking and mobile banking but cannot issue loans or credit cards. They can issue ATM cards and debit cards but cannot issue loans or credit cards.
Introduced by former RBI governor Raghuram Rajan, these new banks were introduced to diversify the banking sector and to include those who transact in cash into the banking system. RBI governor Raghuram Rajan decided to introduce the new banks to diversify the sector and to integrate those who only use cash into the banking system.
Customers will be able to sign up with just their national ID card number.Customers will be able to sign up with just their national ID card number.
In a country that is notoriously bureaucratic, the ease of getting an account and the opportunity to make completely cashless purchases is something new.In a country that is notoriously bureaucratic, the ease of getting an account and the opportunity to make completely cashless purchases is something new.
What is Airtel offering?What is Airtel offering?
Airtel is piloting the banks in Rajasthan, a state with a large rural population, most of whom have little or no access to formal banking.Airtel is piloting the banks in Rajasthan, a state with a large rural population, most of whom have little or no access to formal banking.
With 325 million subscribers, Airtel is India's largest telecom company. It already operates similar banking services in Africa.With 325 million subscribers, Airtel is India's largest telecom company. It already operates similar banking services in Africa.
Airtel's product is the first payments bank to go live in India and the company is promising a completely paperless operation.Airtel's product is the first payments bank to go live in India and the company is promising a completely paperless operation.
It is offering 7.25% interest on savings accounts, significantly more than traditional banks which offer around 4%.It is offering 7.25% interest on savings accounts, significantly more than traditional banks which offer around 4%.
But it has said it will not be issuing ATM or debit cards. But, although it is allowed to, it has said it will not be issuing ATM or debit cards.
Instead, it will allow cash withdrawals at designated Airtel retail outlets and transfers to other banks. Instead, it will allow cash withdrawals at designated Airtel retail outlets and via transfers to other banks.