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Government-owned India Post Payments Bank (IPPB), which seeks to primarily serve the ‘ aam aadmi’ (common man), has decided to introduce quarterly SMS alert charges of ₹10 plus Goods and Service Tax (GST) for all customers, effective August 1.
By introducing SMS alert charges, the bank seems to have revisited its May 31,2020, decision, whereby it had decided to levy SMS alert charges of ₹5 plus GST per quarter on all customers, effective from quarter ending June 2020.
At ₹10 plus GST (of 18 per cent), all customers will have to pay₹11.80 as SMS alert charges per quarter. At ₹5 plus GST, the charges would have been ₹5.90 per quarter.
As at December-end 2019, the bank had 1.55 crore accounts. Hence, the bank can earn ₹73.16 crore in a year via SMS charges.
This move to introduce SMS charges seems to be aimed at shoring up revenues and comes on top of the bank cutting the interest rate on savings bank (SB) deposits thrice since February 2020 from 4 per cent to 2.75 per cent.
Yet to attain optimal scale
In its latest Report on Trend and Progress of Banking in India , the RBI has observed that the evolution of payment banks since their inception (between 2016 and 2018) suggests that they are yet to achieve optimal scale to break-even or attain profitability.
The limited operational space available to them and the large initial costs involved in setting up of the infrastructure imply that it may take time for payment banks to break even as they expand their customer base, it added.
Serving the common man
While its services are available to all, the IPPB mainly focuses on serving social sector beneficiaries, migrant labourers, un-organised sector employees, micro, small and medium enterprises (MSMEs), panchayats, low-income households and the unbanked/under-banked segments in both the rural and urban areas.
The bank’s product suite includes deposits, money transfer, direct benefit transfers, sale of third party products, bill and utility payments, and enterprise and merchant payments. It cannot undertake lending activities.
As per IPPB’s business snapshot, as at December-end 2019, the balances in the 1.55 crore accounts aggregated ₹527.15 crore and the value of transactions was at ₹9,324.89 crore.
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