Paytm has received final approval of the Reserve Bank to formally launch its payments bank and it expects to start operations next month.
Payments banks can accept deposits from individuals and small businesses up to Rs 1 lakh per account.
"Today, Reserve Bank of India gave permission to formally launch Paytm Payments Bank. We can't wait to bring it in front of you," Vijay Shekhar Sharma, founder of One97 Communications, said in a blogpost.
"No other role or responsibility means as much to me as the privilege of building Paytm Payments Bank, and I intend to take a full-time executive role in the Bank," Sharma said further.
He added that at Paytm Payments Bank, the aim is to build a new business model in banking industry, focussed on bringing financial services to hundreds of millions of unserved or underserved Indians.
When contacted, a Paytm spokesperson said the company hopes to launch operations in February with the first branch coming up in Noida, Uttar Pradesh.
Paytm was earlier slated to begin operations around Diwali last year. In 2015, RBI had awarded 'in-principle' approval to Vijay Shekhar Sharma, the founder of One97 Communications, to set up a Payments Bank along with 10 others.
With the objective of deepening financial inclusion, RBI kicked off an era of differentiated banking by allowing SFBs (small finance banks) and PBs (payments banks) to start services. A total of 21 entities were given in-principle nod last year, including 11 for payments banks.
Later, three entities -- Tech Mahindra, Cholamandalam Investment and Finance Company and a consortium of Dilip Shanghvi, IDFC Bank and Telenor Financial Services -- backed out of the payments bank licensing.
Currently, Airtel is the only player that has commenced Payments Bank operations. Aditya Birla Idea Payments Bank is expected to launch services in the first half of 2017.
Sharma will hold the majority share in Paytm Payments Bank, with the rest being held by One97 Communications.
Last month, One97 Communications had restructured its business ahead of the launch of the Payments Bank, merging the wallet business with payments bank operation.
Alibaba Group and its affiliate Ant Financial pumped in USD 680 million into Paytm's parent One97 Communications last year, taking its total shareholding to over 40 per cent in the country's largest mobile wallet operator, Paytm.
However, the Chinese entity will not have a direct shareholding in the payments bank.