The
India Post Payments Bank (IPPB) is a proposed state-owned commercial bank in
India. The bank would use the existing network of the public-sector postal
service, India Post.
History
In
2006, it was announced that India Post would open a bank to erase its ₹1,000 crore
deficit during the 11th Five Year Plan, emulating Poste italiane. In February
2013, it was announced that India Post had hired Ernst and Young to prepare a report
on the proposed bank. Some officials of the Ministry of Finance had opposed the
plan saying that India Post did not have the expertise to provide banking
services such as handling credit.
In
August 2013, the Planning Commission of India said that even though it
supported the plan, it was not feasible owing to financial difficulties at the
moment. It also felt that converting post offices into bank branches may hamper
their original function. In October 2013, the Cabinet of India rejected the
proposal on the grounds that India Post did not have sufficient expertise in
running a bank. In December 2013, India Post announced that it would install
ATMs in 1000 of its office across India in the first half of 2014.
On
27 February 2014, India Post opened its first ATM in Chennai. In April 2014,
the Reserve Bank of India (RBI) gave in-principle banking licences to IDFC and
Bandhan Financial Services out of 26 applicants, but India Post was not considered
for a licence because it had not received the mandatory clearance from the
government. However, the RBI said that it would examine the proposal separately
in consultation with the government.
In
September 2014, a task force was formed by Prime Minister Narendra Modi which
aimed to study ways in which the existing postal network could be leveraged.
The task force was headed by T. S. R. Subramanian. On 4 December 2014, the task
force submitted its report to Minister for Communications and Information Technology
Ravi Shankar Prasad. The report said that more services should be provided in
the field of banking, insurance and e-commerce.
In
late December 2014, it was announced that India Post would issue ATM-cum-debit
cards to its Post Office Savings Bank (POSB) account holders. In January 2015,
it was announced that the Indian government was considering a legislature, to
finalise the setting up of the bank, following which a banking license would be
applied for at the Reserve Bank of India. On 28 February 2015, during the
presentation of the Budget it was announced that India Post will use its large
network to run a payments bank.
Role
in financial inclusion
India
Post has about 1,54,000 post offices, of them 90% are in rural areas. There is
one post office for every 7176 people in India. India Post also has 2,96,000
agents in the rural area. About 2.2 crore people, already receive their
National Rural Employment Guarantee Act (NREGA) payments by post offices. After
State Bank of India, India Post has the largest deposits valued at ₹6 lakh crore.
T.
S. R. Subramanian has said that it could aid in the ongoing Pradhan Mantri Jan
Dhan Yojana financial inclusion plan.
Structure and funding
The
Payments Bank will be set up on a lean operating model. It will focus on
financial inclusion by harnessing low-cost technology based solutions to extend
access to formal banking especially in rural areas and among unbanked and under
banked segments of the society. It has proposed by the task force that the
existing Post Office Savings Bank (POSB) should be continued to run parallel to
the new bank initially. Later, it should be merged with the bank. The existing
post offices shall provide banking services to customer, whereas the bank
branches shall handle back-office work, like processing loan applications,
assessing credit worthiness and risk assessment, investment operations etc.
The
Post Bank shall also provide institutional accounts to panchayats and
micro-credit agencies. Initially, the bank will operate separately from the
postal business, with a branch in every district for the first three years. The
bank will require an initial funding of ₹500 crore from the government.
