New
Delhi: India Post Payments Bank (IPPB) is yet to start operations, but,
already, it is the hottest game in town.
Banks,
insurance firms and asset management companies are approaching it with offers
of equity partnerships, joint ventures or other mutually beneficial
arrangements.
That
shouldn’t surprise anyone.
IPPB
will, on the day it launches, have a network of more than 150,000 branches, of
which almost 140,000 are in India’s rural hinterland.
In
total, 50 companies including Barclays Bank, Deutsche Bank, Citibank and
several state-owned banks have sent proposals to the department of posts for a
partnership. The International Finance Corporation, part of the World Bank
Group, has offered to be an equity partner. Money transfer company UAE Exchange
is ready to open vostro (in which the Indian bank will manage a local account
corresponding to one held in a foreign bank) accounts for rupee currency,
targeting Indians living in West Asia.
Like
other payments banks, IPPB will target financially excluded customers such as
migrant workers, low-income households and tiny businesses. It will not lend
money and, as a result, will be shielded from the risks that conventional banks
are exposed to. And it will have a huge offline presence to complement its
online one, for which the department of posts has already identified a core
banking solution (the software that runs banks).
The
department of posts was among the 11 entities that got an in-principle approval
from the Reserve Bank of India (RBI) to start a payments bank. Three entities
have surrendered their licence after they discovered the business is
characterized by high volumes and low profit margins. For India Post, though,
the business will be a natural extension.
India
Post already accepts money from customers as part of its post office bank
accounts and long-term deposit schemes such as National Savings Certificate. Its
money order service is widely used by migrant workers to remit money back home.
It
will also not have to gain trust of customers like its competitors, especially
in the rural areas, as the local postman is still an integral part of the
day-to-day lives of the rural populace.
On
Wednesday, the cabinet approved a proposal to set up IPPB with a corpus of Rs.800
crore. Communications and information technology minister Ravi Shankar Prasad
said IPPB has plans to open 650 branches and will be operational by September
2017.
“IPPB
will be a game changer for rural and suburban India. We had initially planned
to roll out operations in three years. But the Prime Minister has given us a
challenge to start operation in a year’s time. Allgrameen dak sevaks in
rural post offices will be given hand-held devices by March 2017 and by
September 2017, all 650 branches of postal payments bank will become
operational,” Prasad said.
The
payments bank will begin with Rs.400 crore equity capital and Rs.400
crore as grant from the government. IPPB plans to set up 5,000 automated teller
machines as well, he added.
N.C.
Saxena, former secretary of the erstwhile Planning Commission, said that
financial institutions are sensing the potential that IPPB has in terms of its
connectivity and reach.
“In
today’s digital era, telegrams and post cards are no longer used. But India
Post has a vast infrastructure already in place and a very good rural network.
Besides the 1.5 lakh post offices, they also have a network of temporary post offices—basically
one-person post offices—that take care of the last-mile connectivity in rural
areas,” he said, adding that financial institutions both in the private and
public space cannot hope for a partner with a better reach in rural areas.
“But
the post office payment bank will have to quickly move to an online platform to
make it easier for customers to access their accounts and conduct
transactions,” Saxena said.
Source
: http://www.livemint.com
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