4 India Post Payments Bank
Why in News?
Prime Minister on 1st September launched the India Post Payments Bank (IPPB) that offers doorstep banking to customers.
About IPPB
• India Post Payments Bank has been incorporated as a public sector company under the department of posts, with 100% government equity and is governed by the Reserve Bank of India.
• It started operations on 30 January, 2017, by opening two pilot branches one in Jaipur and the other in Ranchi.
• It will focus on providing banking and financial services to people in rural areas, by linking all the 1.55 lakh post office branches with India Post Payments Bank services by the end of 2018. This will create the country’s largest banking network with a direct presence at the village level.
• It will offer a range of products—savings and current accounts, money transfer, direct benefit transfer, bill and utility payments, enterprise and merchant payments. These products, and services, will be offered across multiple channels (counter services, micro-ATM, mobile banking app, SMS and IVR).
o It will also provide access to third-party financial services such as insurance, mutual funds, pension, credit products and forex.
o It will not offer any ATM debit card. Instead, it will provide its customers a QR Code-based biometric card. The card will have the customer’s account number embedded and the customer does not have to remember his/her account number to access the account.
o IPPB has also partnered with different financial organisations to provide loans, investments and
insurance products.
Analysis
There are various issues and challenges facing the IPPB, viz-
• Charges and restrictions: There are 80 different charges and restrictions (including charges to get cash delivered at doorstep, transactions, withdrawals and deposits, etc) which could prove to be challenges in its objective of financial inclusion.
How IPPB is different from traditional banks?
• A payments bank is a differentiated bank, offering a limited range of products.
• It can accept deposits of up to ₹ 1 lakh per customer.
• Unlike traditional banks, it cannot issue loans and credit cards.
• It will offer three types of savings accounts—regular, digital and basic—at an interest rate of 4% per annum.
• It will provide doorstep banking facility at a charge of ₹15-35 per transaction. The limit for doorstep banking is ₹ 10,000.
• Other payments banks that have started operations are Airtel Payments Bank Ltd, Paytm Payments Bank Ltd and Fino Payments Bank Ltd.
• Limited manpower in post offices- Clients might find it difficult to withdraw cash from rural post offices because these are managed by one or two people, who are unlikely to have a lot of money with them.
• Limited accessibility- IPPB is unable to offer ATM cards yet. As a result clients can’t use the united payments
interface service.
• Technical Issues- It’s necessary that the customer’s fingerprints match the UIDAI database for each transaction. The problem is that the UIDAI told the Supreme Court that it can’t ensure 100 per cent biometric matching.
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• Limited appeal- For Urban customers who have easy access to private banks offering purely digital accounts with more services, interest rates of up to 6 per cent and latest technologies like UPI.
o Even in rural areas, it is unlikely to make much sense since Jan Dhan Yojana has already provided zero balance bank accounts with RuPay debit cards with full-scale banks.
• Bad health of postal department- Department of posts isn’t in good health as its deficit doubled in the year
2016-17 and only 55 post offices have been added in the
country in the last five years.
• Competition with Private players- IPPB is also likely to face stiff competition from private companies, which are generally nimbler in adapting to business realities and far more customer-friendly compared to the government- owned ones.
However, despite these challenges there is also a need to understand various advantages of establishing IPPB-
• Department of Posts and IPPB will work in tandem to take
Other initiatives taken for promoting Financial
Inclusion in the country
• Pradhan Mantri Jan-Dhan Yojana
• Relaxation on Know Your Customer (KYC)
norms.
• Engaging business correspondents (BCs) as intermediaries for providing financial and banking services.
• Opening of bank branches in unbanked rural centres.
the benefits of government schemes and financial services that are not easily available in rural areas to customers across the country and to the marginalized population in urban and rural areas alike. The objective of IPPB will be public service rather than promoting commercial interests.
• While many other banks and financial institutions are working on the same theme, the USP of IPPB will be its ability to ease access and handhold the adoption of new age banking and payments instruments among citizen of all walks of life through the delivery by postmen and Grameen Dak sevaks, savings agents and other franchisees who will take banking to door steps. IPPB thus aspires to the most accessible, affordable and trusted bank for the common man with the motto - “No customer is too small, no transaction too insignificant, and no deposit too little”.
If it succeeds, the new payments bank could usher in a new era of rapid financial inclusion across rural India.
Why in News?
Prime Minister on 1st September launched the India Post Payments Bank (IPPB) that offers doorstep banking to customers.
About IPPB
• India Post Payments Bank has been incorporated as a public sector company under the department of posts, with 100% government equity and is governed by the Reserve Bank of India.
• It started operations on 30 January, 2017, by opening two pilot branches one in Jaipur and the other in Ranchi.
• It will focus on providing banking and financial services to people in rural areas, by linking all the 1.55 lakh post office branches with India Post Payments Bank services by the end of 2018. This will create the country’s largest banking network with a direct presence at the village level.
• It will offer a range of products—savings and current accounts, money transfer, direct benefit transfer, bill and utility payments, enterprise and merchant payments. These products, and services, will be offered across multiple channels (counter services, micro-ATM, mobile banking app, SMS and IVR).
o It will also provide access to third-party financial services such as insurance, mutual funds, pension, credit products and forex.
o It will not offer any ATM debit card. Instead, it will provide its customers a QR Code-based biometric card. The card will have the customer’s account number embedded and the customer does not have to remember his/her account number to access the account.
o IPPB has also partnered with different financial organisations to provide loans, investments and
insurance products.
Analysis
There are various issues and challenges facing the IPPB, viz-
• Charges and restrictions: There are 80 different charges and restrictions (including charges to get cash delivered at doorstep, transactions, withdrawals and deposits, etc) which could prove to be challenges in its objective of financial inclusion.
How IPPB is different from traditional banks?
• A payments bank is a differentiated bank, offering a limited range of products.
• It can accept deposits of up to ₹ 1 lakh per customer.
• Unlike traditional banks, it cannot issue loans and credit cards.
• It will offer three types of savings accounts—regular, digital and basic—at an interest rate of 4% per annum.
• It will provide doorstep banking facility at a charge of ₹15-35 per transaction. The limit for doorstep banking is ₹ 10,000.
• Other payments banks that have started operations are Airtel Payments Bank Ltd, Paytm Payments Bank Ltd and Fino Payments Bank Ltd.
• Limited manpower in post offices- Clients might find it difficult to withdraw cash from rural post offices because these are managed by one or two people, who are unlikely to have a lot of money with them.
• Limited accessibility- IPPB is unable to offer ATM cards yet. As a result clients can’t use the united payments
interface service.
• Technical Issues- It’s necessary that the customer’s fingerprints match the UIDAI database for each transaction. The problem is that the UIDAI told the Supreme Court that it can’t ensure 100 per cent biometric matching.
31
• Limited appeal- For Urban customers who have easy access to private banks offering purely digital accounts with more services, interest rates of up to 6 per cent and latest technologies like UPI.
o Even in rural areas, it is unlikely to make much sense since Jan Dhan Yojana has already provided zero balance bank accounts with RuPay debit cards with full-scale banks.
• Bad health of postal department- Department of posts isn’t in good health as its deficit doubled in the year
2016-17 and only 55 post offices have been added in the
country in the last five years.
• Competition with Private players- IPPB is also likely to face stiff competition from private companies, which are generally nimbler in adapting to business realities and far more customer-friendly compared to the government- owned ones.
However, despite these challenges there is also a need to understand various advantages of establishing IPPB-
• Department of Posts and IPPB will work in tandem to take
Other initiatives taken for promoting Financial
Inclusion in the country
• Pradhan Mantri Jan-Dhan Yojana
• Relaxation on Know Your Customer (KYC)
norms.
• Engaging business correspondents (BCs) as intermediaries for providing financial and banking services.
• Opening of bank branches in unbanked rural centres.
the benefits of government schemes and financial services that are not easily available in rural areas to customers across the country and to the marginalized population in urban and rural areas alike. The objective of IPPB will be public service rather than promoting commercial interests.
• While many other banks and financial institutions are working on the same theme, the USP of IPPB will be its ability to ease access and handhold the adoption of new age banking and payments instruments among citizen of all walks of life through the delivery by postmen and Grameen Dak sevaks, savings agents and other franchisees who will take banking to door steps. IPPB thus aspires to the most accessible, affordable and trusted bank for the common man with the motto - “No customer is too small, no transaction too insignificant, and no deposit too little”.
If it succeeds, the new payments bank could usher in a new era of rapid financial inclusion across rural India.
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