Prime Minister Narendra Modi launched the India Post Payments Bank (IPPB) on September 1, 2018. The move was expected to take banking services to the unbanked rural areas across the country, thus furthering the process of financial inclusion initiated by the Jan Dhan Yojana.
The union cabinet had earlier approved revision of the outlay on the project from Rs 800 crore to Rs 1,435 crore.
Incorporated as a public sector company under the department of posts, with 100 per cent government equity, IPPB is governed by the Reserve Bank of India.
Features
Initially, the IPPB is to provide current and savings account facility at 650 post offices and 3,250 access points. These branches and access points will include 155,000 post offices in the country, many of them in rural areas, by December 2018.
There will be more than 10,000 doorstep service providers, and a 24×7 multilingual customer support system. A toll-free number has been provided to book a doorstep service or to contact the nearest post office.
The services offered by the bank include current account, savings account, remittances, money transfer, direct benefit transfer, enterprise and merchant payment. Various channels—over-the-counter services, micro ATM, mobile banking app, text messages, phone calls – are available to customers to access the products and services. Access to third-party financial services such as insurance, mutual funds, pension, credit products and forex will also be available.
Three types of savings accounts are on offer at IPPB—regular, digital and basic. A digital savings account can be opened through the IPPB mobile app. The regular and basic accounts have to be opened either through the post office or the postman.
The three savings accounts are not required to maintain a minimum balance; so the IPPB savings accounts are zero-balance accounts. There is, however, a ceiling on how much one can place in such accounts: the Reserve Bank of India has directed that not more than Rs 1 lakh should be in any account at a given point of time. As soon as an IPPB account crosses the Rs 1 lakh limit there will be an automatic rejection of the transaction. There is a way to overcome this problem. A post office savings account can be opened and linked with the IPPB account concerned so that any balance exceeding Rs 1 lakh will be transferred to the post office account, which is a regular savings bank account.
A digital account is valid only for 12 months; it has to be converted into a regular savings account by the account holder providing his/her biometric data to the postman. If that is not done, the digital savings account will be closed.
IPPB accounts will enjoy an interest rate of 4 per cent per annum. This interest will be calculated on the daily closing balance, and paid quarterly.
As for deposits and withdrawals, there are no restrictions on the number of deposits or withdrawals in the digital and regular savings accounts. In the basic savings account, only four cash withdrawals are allowed. Cash deposits and withdrawals require one to go to the nearest post office where the IPPB service is available. The postman or Grameen Dak Sevaks (GDS) may be called to visit at home for making both digital and cash transactions using the QR card that comes with an IPPB account. While the doorstep service is free for opening an account, other services have a price: ₹25 (plus GST) for every cash-based transaction and Rs 15 (plus GST) for a digital transaction.
If the IPPB app is used to make payments, then there no charges. This mobile app can be used for checking balance, statement, bill payments and for online transfers.
Accounts can be opened in the bank very quickly through Aadhaar cards. The account holders of an IPPB will be issued a QR card with a unique QR code. The account holder’s biometrics will authenticate the use of the QR card. This card can be used for transactions like bill payments, cashless purchases and money transfer, but not for withdrawal of cash from an ATM, as IPPB is not giving an ATM or debit card at present.
Claims that are made by farmers and daily wage earners under the Pradhan Mantri Fasal Beema Yojana and the Mahatma Gandhi National Rural Employment Guarantee Scheme can be met through the payments bank.
RBI does not allow a payments bank to give any form of loan or issue a credit card (a credit card also being a form of unsecured personal loan). However, IPPB and the Punjab National Bank (PNB) have come to an agreement under which the latter would work as an agent to provide loans to account holders, without charging any commission. The interest on loans would be as per the rate charged by PNB.
Features of Payment Banks
As per RBI guidelines, the activities of payments banks are restricted to acceptance of demand deposits, remittance services, Internet banking and other specified services. They cannot undertake lending services.
These banks can accept only savings and current deposits of up to Rs 1 lakh per customer. They can issue ATM or debit cards but not credit cards.
Payments banks are permitted to distribute mutual funds and insurance products which are non-risk sharing simple financial products.
At present these banks offer interest rates similar to that offered by regular banks.
As per RBI guidelines, payments banks are not allowed to accept fixed or recurring deposits.
Background
The RBI has given guidelines on the basis which payments banks will be licensed. As the main objective of these banks is financial inclusion, these banks are characterised by the provision of small savings accounts, payments and remittance services to migrant labour workforce, low income households, small businesses, other unorganised sector bodies and other users.
The RBI gave in-principle approval in August 2015 to 11 entities to start payments bank in India, among which was the department of posts. The first such bank to be launched was the Airtel Payments Bank. Then came other payments banks like Paytm Payments Bank and Fino Payments Bank; more recently, the Aditya Birla Payments Bank and Jio Payments Bank were launched.
In January 2015, the central government announced that it was considering legislation to finalise the setting up of the payments bank of the India Post, and applied for a banking licence. In the budget of 2015-16, an announcement was made to the effect that India Post would use its network to run a payments bank.
In January 2017, IPPB had started operations at two pilot branches in Raipur and Ranchi.
India Post has been offering banking services for some time. It provides a savings account, withdrawal and deposit services. IPPB is different from the conventional post office account in that it will provide a technology-driven payments infrastructure in addition to the advantage it enjoys due to its pervasive presence through India Post’s physical offices. IPPB will deploy around 300,000 postmen, gramin dak sewaks with cell phones and biometric devices in the effort to provide doorstep banking, especially in rural areas.