ANALYSIS. Postal Dept’s payments bank has a huge head-start over competitors

A customer base of over 33 crore account-holders and 1.54 lakh touch points across the country could give the proposed payments bank arm of the Department of Posts a huge head-start over the other seven recipients left in the fray to start a payments bank.

According to the plan drawn up by the Postal Department, the India Post Payments Bank (IPPB) will accept demand deposits — savings accounts of up to ₹1 lakh and current accounts with special focus on micro, small and medium enterprises, small entrepreneurs/merchants, village panchayats, and self-help groups.

Much on offer Further, IPPB will offer remittance service, domestic as well as cross-border, with special focus on migrant labourers and low-income households; facilitate payments of various Central/State government and Municipal dues and fees of various universities/educational institutions; Direct Benefits Transfer (DBT) of social security payments of various ministries to beneficiaries; and utility bill payments for electricity, water, telephone, gas, etc.

IPPB will be set up on a lean operating model. According to the Department’s blueprint, it will focus on financial inclusion by harnessing low-cost technology to extend access to formal banking, especially in rural areas and among the unbanked and under-banked segments of society.

CBS rollout In the run-up to the setting up of the payments bank, the Department has rolled out Core Banking Solution (CBS) in more than 17,000 post offices.

The CBS facilitates ATM, internet, mobile, and phone banking for post office savings bank (POSB) customers 24×7 along with fund transfers through National Electronic Fund Transfer (NEFT) and Real Time Gross Settlement (RTGS) systems.

IPPB is seeking to provide multiple user interaction channels, including web portal, ATMs, call centres, employee help desks, and SMS gateway, besides the conventional post office counters. 

The small savings schemes operated by the Department on behalf of the Finance Ministry include savings accounts, recurring deposits, time deposits, monthly income scheme, public provident fund, National Savings Certificate, Kisan Vikas Patra, Senior Citizens Savings Scheme and Sukanya Samridhi Accounts. As on March-end 2015, the outstanding balance under all schemes put together was ₹6.19 lakh crore.

Operations from Sept On June 1, the government cleared the proposal of the Department of Posts to set up the IPPB with a corpus of ₹800 crore.

It plans to have 650 branches operational by September 2017.

Besides the Department of Posts, the other entities that received RBI’s in-principle approval to start payments banks include Aditya Birla Nuvo; Airtel M Commerce Services; Fino PayTech; National Securities Depository; Reliance Industries; Vijay Shekhar Sharma (founder of Paytm); and Vodafone m-pesa.

Though three other applicants — Cholamandalam Distribution Services, Dilip Shantilal Shanghvi (founder of Sun Pharmaceutical Industries) and Tech Mahindra — also received the central bank’s in-principle approval to start payments bank, they dropped their plans.