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.
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 nonbanking 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:
1. 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.
2. Issuance of ATM / Debit
Cards. Payments banks, however, cannot issue credit cards.
3. Payments and remittance
services through various channels including branches, Automated Teller
4. Machines (ATMs),
Business Correspondents (BCs) and mobile banking.
5. Issuance of PPIs as per
instructions issued from time to time under the PSS Act.
6. Internet and mobile
banking - The payments bank is expected to leverage technology to offer low
cost banking solutions.
7. 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.
8. 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.
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. Someof 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.
·
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 inter-operable 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
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
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.
