India Post Payments Bank commences operation: Here's all you need to know

The Reserve Bank of India (RBI) recently gave its nod to India Post Payments Bank (IPPB) to commence operations. IPPB became operational from 30 January 2017. It is the third entity after Airtel and Paytm payment bank, to get the central bank's approval and the second after Airtel Payment Bank to commence operations.

IPPB stated that it will offer 4.5 per cent of interest on deposits up to Rs 25,000 and 5.0 per cent interest on deposits up to Rs 50,000. For deposits between Rs 50,000 to one lakh rupees, the bank will offer an interest rate of 5.5 per cent.

Apart from offering savings account and current account deposits, IPPB will provide digitally-enabled payments and remittance services of all kinds between entities and individuals. It will also provide access to third-party financial services such as insurance, mutual funds, pension, credit products and forex in partnership with insurance companies, mutual fund houses, pension providers, banks and international money transfer.

IPPB will use postmen to help deliver banking services and the huge network of post offices will provide enough muscle to the new player. IPPB also plans to offer services through internet and mobile banking as well as through pre-paid instruments such as mobile wallets, debit cards, ATMs, point of sale and mobile point of sale terminals. The bank will train postmen to enhance their soft skills, so as to efficiently carry out banking operations.

The Department of Posts, launched two branches of the IPPB in Raipur and Ranchi on 30th January, 2017. "By September 30, 2017, the wide network of post offices will enable us to make banking at doorstep a reality," Finance Minister Arun Jaitley said, while announcing the launch of the two branches. The bank is likely to launch operations in these two branches on a pilot basis.

He also said that that payment banks will have a 'multiplier impact' on banking system and financial inclusion, and will provide doorstep banking to people in remote areas at lower cost and compete with traditional banks in the future.  He added that as all post office branches will get converted into banks, the banking system of the country will gain a lot of strength.

Around 1,000 ATMs that are currently run by India Post will be transferred to IPPB, as per RBI guidelines. IPPB plans to open 650 branches across several districts by 30 September 2017. The bank shall operate as a public limited company under the department of posts with 100 per cent equity from the government. As per CMIE, the Government of India invested Rs 800 crore on this bank, of which Rs 275 crore was already released.

The idea of setting up payments bank came to RBI in November, 2014. The objective of RBI to set up payment banks was to promote financial inclusion (banking the unbanked areas). These banks shall not offer loans and will be allowed to accept deposits up to one lakh rupees. However, they can offer several other facilities that are already provided by full-fledged banks, which shall be of immense help in taking banking services across the country, especially in remote areas.

Earlier this month, Airtel Payments Bank launched nationwide operations by offering 7.25 per cent interest on savings account, slightly higher than seven per cent offered by State Bank of India. Paytm, too, is expected to start operations as a payment bank next month.