Frequently
Asked Questions
India Post
Payments Bank (IPPB)
Concept of Payments Bank
1. What is
a Payments Bank?
A Payments
Bank is a “differentiated bank” set-up under the guidelines issued on Nov 27,
2014 by the Reserve Bank of India (RBI) to further financial inclusion for the
underserved population by providing (i) current and savings accounts and (ii)
payments or remittance services to migrant labour workforce, low income
households, small businesses, unorganised sector entities and other users. This
is to be done by enabling high volume-low value transactions in deposits and
payments or remittance services in a secure technology-driven environment.
Please click
on this link for further details:
https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=32615
(RBI Guidelines)
2. Why is a
Payments Bank required?
A vast
majority of the rural population (over 60%, as per RBI), is still unbanked or
underbanked. An easily accessible payments network and universal access to
savings is fundamental to financial inclusion. At the same time, several
non-banking entities such as the Department of Posts (DoP), prepaid payment
instrument companies, business correspondent companies, etc., have had
reasonable success in facilitating payments and other select financial services
in urban areas. Their customers, however, face several limitations and
difficulties arising out of their non-banking status. Of particular note
amongst these is the DoP which has a wide network and experience of handling
financial transactions, but does not have a banking license. Given their
potential to further the cause of financial inclusion, the RBI granted such
entities a differentiated banking license, i.e. a payments bank license, which
enables these entities to provide banking services other than credit. Credit
and insurance are as integral to financial inclusion as are other banking
services, and payments bank can offer these products as well but only in
partnership with other banks/ insurers and on a non-risk sharing basis.
3. What is
the scope and activities of the Payments Bank?
As per the RBI
Guidelines, the payments bank will be set up as a differentiated bank and shall
be permitted to set up its own outlets such as branches, Automated Teller
Machines (ATMs), Business Correspondents (BCs), etc. to undertake only certain
restricted activities permitted to banks under the Banking Regulation Act,
1949, as given below:
Acceptance of demand deposits, i.e., current deposits, and
savings bank deposits from individuals, small businesses and other entities, as
permitted. The payments bank will be restricted to holding a maximum balance of
Rs. 1,00,000 per individual customer.
Issuance of ATM / Debit Cards. Payments banks, however,
cannot issue credit cards.
Payments and remittance services through various channels
including branches, Automated Teller Machines (ATMs), Business Correspondents
(BCs) and mobile banking.
Issuance of PPIs as per instructions issued from time to
time under the PSS Act.
Internet and mobile banking - The payments bank is expected
to leverage technology to offer low cost banking solutions.
Functioning as Business Correspondent (BC) of another bank
– a payments bank may choose to become a BC of another bank, subject to the RBI
guidelines on BCs.
As a
channel, the payments bank can accept remittances to be sent to or receive
remittances from multiple banks under a payment mechanism approved by RBI, such
as RTGS / NEFT / IMPS.
Payments banks will be permitted to handle cross border
remittance transactions in the nature of personal payments or remittances on
the current account.
Payments banks can undertake other non-risk sharing simple
financial services activities, not requiring any commitment of their own funds,
such as distribution of mutual fund units, insurance products, pension
products, etc. with the prior approval of the RBI and after complying with the
requirements of the sectoral regulator for such products.
The payments
bank may undertake utility bill payments etc. on behalf of its customers and
general public.
Please click
on this link for further details:
https://rbi.org.in/scripts/bs_viewcontent.aspx?Id=2900 (RBI Guidelines)
4. Are
there any restrictions on payments banks as compared to other commercial banks?
Given that
their primary role is to provide payments and remittance services and demand
deposit products to small businesses and low-income households, payments bank
will initially be restricted to holding a maximum balance of Rs. 1,00,000 per
individual customer.
Payments banks
cannot issue credit cards and cannot grant loan/ credit out of their own books
of accounts.
Apart from
amounts maintained as Cash reserve ratio (CRR) with RBI, Payments Bank will be
required to invest minimum 75 percent of its demand deposit balances in
Government securities/treasury bills with maturity up to one year and hold
maximum 25 percent in current and fixed deposits with other scheduled
commercial banks for operational purposes and liquidity management.
The payments
bank cannot set up subsidiaries to undertake non-banking financial services
activities. The other financial and non-financial services activities of the
promoters, if any, should be kept distinctly ring-fenced and not comingled with
the banking and financial services business of the payments bank.
The payments
bank will be required to use the words “Payments Bank” in its name in order to
differentiate it from other banks.
5. Has this
model of Post office setting up a bank worked anywhere else in the world?
Postal
operators are the leading financial services providers in over 75% of the
countries around the world. Some of the Post Banks in the world have been
highly successful, i.e. Japan, New Zealand, Switzerland, France, China, South
Korea, South Africa, Morocco to name a few.
Department of
Post
6. Why is
DoP setting-up a payments bank?
DoP has been
successfully running the Post Office Savings Bank for the Ministry of Finance.
Setting up its independently owned bank is the next logical progression. Based
on feasibility studies and a subsequent Detailed Project Report, the
Department, in 2013, made an application to the RBI and a proposal to the
Public Investment Board (PIB) to set up a universal bank. However, the
Department was advised by the PIB to set up a “differentiated bank” under the
relevant guidelines. Accordingly when the RBI came up with the guidelines for
licensing of Payments Banks in November 2014, the Department of Posts made an
application for the same and got the in-principle approval in September 2015
for setting up its payments bank. 4
The setting up of the payments bank is therefore necessary in
view of current market realities and to ensure continued relevance of DoP’s
products and services. Among other things, the decision to set up the payments
banks comes in the wake of changes in the banking and payments landscape in the
country. The payments bank will ensure that the banking and payments services offered
through the postal network are well integrated and completely interoperable
with the rest of the banking and payments ecosystem and will leverage new age
technology in line with key technological advances in the banking sector such
as unified payments interface (UPI).
7. What is
the GOI’s outlook on DoP’s foray into banking?
In the Union
Budget of 2015-16, the Honourable Finance Minister made the following
announcement:
“The
Government is committed to increasing access of the people to the formal
financial system. In this context, Government proposes to utilize the vast
Postal network with nearly 1, 54,000 points of presence spread across the
villages of the country. I hope that the Postal Department will make its
proposed Payments Bank venture successful so that it contributes further to the
Pradhan Mantri Jan Dhan Yojana.”
In his
Independence Day speech at the Red Fort, on 15th August
2016, the Hon’ble Prime Minister Shri Narendra Modi spoke about IPPB:
“The Post Office
is an example of our identity. We have revived and rejuvenated our post
offices. IT is now linked with the poor and small persons. If any government
representative gets the affection of a common man in India, it is the postman.
Everyone loves the postman and the postman also loves everybody, but we never
paid attention towards them. We have taken a step to convert our post offices
into payments banks. Starting with this, the payments bank will spread the
chain of banks in the villages across the country in one go”
8. How will
setting up the payments bank benefit DoP?
The payments
bank will not only drive revenues for DoP but also help in maintaining DoP’s
brand image and relevance in the current financial landscape that is evolving
rapidly. For e.g. Utility bill payments services of the IPPB as a Bharat Bill
Payment Operating Unit (BBPOU) will help DoP in increasing its market share in
the utility bill payments space and provide technology driven services to
customers. New age technology will enhance customer experience, provide more
options and help in serving the larger cause and vision of the GOI i.e. to
bring about financial inclusion for the vast unbanked and underserved
population.
9. What
will be the role and relationship of DoP with the proposed payments bank?
The payments
bank will be 100% owned by the Government of India via DoP, and will have an
independent board of directors with representation from DoP and other
stakeholders from within the Government of India to ensure strategic alignment
with the overall objectives of the DoP and the Government of India.
The post
offices at different levels will be the main customer touch points for the
bank’s services. A close liaison between the bank and DoP staff at the access
points will be maintained on a regular basis at the branch level for success of
the delivery model
India Post
Payment Bank (IPPB)
10. When
will India Post Payments Bank (IPPB) start operations?
IPPB is
expected to start operations in FY 2017-18 5
11. How many branches are likely to be opened?
IPPB is slated
to have 650 branches at district headquarters. All post offices across the
country will function as customer access points for IPPB.
12. What
will be the USP for IPPB?
The latest
payments and banking technology, easy to use interface, the trusted network of
the post office and its dedicated staff with a local connect will be the USP of
the IPPB. IPPB will bring in innovative services and interface for its target
customer segments in all areas. The accessibility and ease of use of services
through a combination of modern technology and the widespread DoP physical
network, capable of providing door step services will make it a unique payments
bank. Through a combination of physical and digital channels, payments bank
will build the most accessible bank in the country especially in rural and
underserved areas of the country.
13. How
will IPPB employees be recruited? What are the various mechanisms through which
they get selected?
Various
options regarding the recruitment and selection of IPPB employees have been
considered. These include deputation from DoP or other public sector banks,
direct recruitment through IBPS, contractual arrangements for certain skilled
staff positions etc.
DoP’s role in
IPPB
14. How
will IPPB function?
IPPB has been
set up as a Public Limited Company under the Department of Posts with an
independent Board of Directors. It will be headed by a Managing Director and
CEO, and will set up a corporate head quarter and approx. 650 branches to
manage its functions on a day to day basis. IPPB will leverage the physical and
IT infrastructure of the Post office and be set up on a lean operating model.
It will focus on low-cost, low-risk, technology led solutions to extend access to
formal banking.
Products and
Services
15. How
will the products and services of IPPB be different from DoP’s payment and
remittance products?
DoP payments
and remittances products are based on the basic money order services adapted
for the digital age. While IPPB will provide the same benefits of payments and
remittances to the customers, by adopting newer, efficient processes and
technologies such as mobile based payments, digital wallets and innovative
payment and remittance products that are continuously emerging in the market
today. Combined with doorstep banking transactions and easy to use mobile and
internet banking options IPPB will significantly improve accessibility of its
services. Additionally, IPPB products will be well integrated and inter-operable
with the rest of the banking industry.
IPPB will
drive the benefits of financial inclusion by bringing a host of financial
products to suit the needs of different strata of society with special focus on
the marginalized sections and citizens in rural areas.
Product
innovation will be a continuous exercise to expand the bouquet of services
adapting to the evolving needs of its customers technologies and the rapid
advancements in communication and payments 6
16. Will there be an impact on POSB?
Apart from
savings account with up to INR 1,00,000 in deposit, the products offered by
IPPB are different from POSB products. POSB savings accounts do not have any
ceiling limit unlike payments bank savings account. On the other hand payments
banks can offer current accounts for use by businesses and institutions whereas
POSB does not offer these accounts. Other kinds of deposits under POSB are
unique to it and will not be on offered by the payments bank. POSB accounts are
mainly savings instruments.
Simply put
while POSB is more focussed on returns from small savings, IPPB will be
focussed on transactions. Thus there will be an inherent synergy between the
two and each will complement the other.
17. How
will IPPB improve disbursement of subsidies?
IPPB is being
set up by the GoI with a primary focus of improving the Direct Benefit Transfer
of various subsidies. IPPB will be providing a robust technology platform for
DBT disbursements and build a strong reporting mechanism. By channelling a
majority of subsidy disbursements through its combined network, DoP-IPPB
combine will significantly increase its current market share.
Customers
18. Who
will be the target customer of IPPB?
Apart from the
existing customers of the DoP, IPPB will focus on the underbanked and unbanked
population in different parts of the country. It will also try to target
services for MSMEs, senior citizens, students, migrant population, low income
households, unorganized sector and other groups with special service
requirements.
19. How
will the customer choose between the savings account of POSB and IPPB?
Both POSB and
IPPB will have different branding and the product features will be quite
different. At time of signing up, customers will be clearly told what the
product features are and customers will be able to choose the product of their
choice.
Given the
difference in purpose of the two accounts, the POSB customers can be encouraged
to open an IPPB account for managing their fund flow including bill payments,
remittances to other family members, businesses etc. depending on their needs.
Customers focusing on savings may prefer to have their deposits with POSB and
transact through their IPPB account as per requirements.
Customers will
be given the option to channel money from their IPPB accounts to any of the
POSB schemes. For example, an IPPB customer will be able to use money in his
account to open and service a RD/ TD/ SSY or any other POSB account. Thus both
IPPB and POSB can synergistically serve the customers.
Overall
20. I would
like to know more and contribute to the IPPB journey. How can I do that?
You can send your questions
and suggestions to pbi-project@gov.in or call us at +91 11 23096008 and check
for regular updates on https://www.facebook.com/ippbonline/ and http://utilities.cept.gov.in/dop.
Frequently
Asked Questions