India Post Payments Bank (“IPPB”) – ‘Road to Financial Inclusion’

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The benefits accumulated from India’s growth have been centered more on the fast-moving metropolitan cities, leaving out the countryside where more than 65% of our population lives. Naturally, people in cities have better access to financial, social and economic services. The rich have become richer and the poor have become poorer. In order to bridge this financial gap, the NDA government has come up with ‘India Post Payments Bank’.

 

WHAT IS IPPB?

IPPB is a government-owned Public Ltd company which is a payments bank headquartered in New Delhi. It was inaugurated on 1st September 2018. It is a digital bank in which an account can be opened from the mobile app of the bank using Aadhar card and PAN.

 

WHAT SERVICES DOES IT OFFER?

The bank offers to open savings and current account with an upper cap of Rs 1 Lac. The QR card technology adopted by it will allow customers to make use of QR code payments using biometric verification. This eliminates the use of account number, PIN and password.

The QR card can be used for transactions like bill payments, cashless purchases, and money transfer, it cannot be used to withdraw cash from an ATM. IPPB is not offering its customers an ATM or debit card at present.

It’s Unified Payments Interface (UPI) model can be used to make instant interbank transactions. Immediate payment service, national electronic funds transfer, real-time gross-settlement and direct benefit transfer are some of the other services provided by IPPB. Currently, it is offering the same interest rate as offered by regular banks

IPPB will be offering 4% interest to its savings account customers. It is also offering doorstep services to its customers, under which opening an account will be free of cost, but other services like cash transactions are charged at ₹25 (plus GST) and non-cash transactions at ₹15 (plus GST).

HOW IS IT DIFFERENT FROM REGULAR BANKS?

As per Reserve Bank of India guidelines, payments bank cannot accept fixed or recurring deposits. Such a bank is not allowed to give any form of a loan or issue a credit card, which is also a form of an unsecured personal loan.

LONG-TERM BENEFITS

IPPB aims to reach out to the section of the population comprising of small and medium farmers, wage earners, laborers, migrants, and the unorganized sector. This way it will cover those rural swathes which have been bereft of the advancement in the banking and financial sector. When these people start to open accounts and deposit their income, it will not only improve the financial base of the country but also lead to more tax compliance.
The government also plans to distribute NREGA wages, subsidies and pensions via the accounts opened in IPPB. Thus, eliminating any form of middlemen to avoid exploitation.

People might question that why do we need another public sector bank when all the public sector banks have branches in rural areas and knowing the fact that almost all public sector banks have been suffering from the NPA issues. Firstly, if we look at the ground reality, even the largest bank of India, SBI, does not have branches in all areas of the country, but post-office is one such institution which is present in each and every city and village. Besides that, the rural population will always have more reliance on post office than a bank so, they would be more inclined to use services of IPPB than going to a bank. Secondly, the NPA issues won’t bother IPPB as it won’t be allowed to issue loans as a payment bank.

CONCLUSION

Financial Inclusion means that each and every individual has access to useful and affordable financial products and services that meet their needs- transactions, payments, savings, credit,insurance and pensions etc.

In India, there are 600,000 villages and 640 districts in which only 40% of the households have bank accounts, most of which are stagnant. The other grim statistics is that only 38% of the 117,200 branches of the scheduled commercial banks are working in rural areas.

IPPB will this provide the much needed financial access which will improve the living standard of the poor and the deprived section. It will create the country’s largest banking network with a direct presence at village level.

Author | Deepti Kansal

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