All you want to know about...India Post Payment Bank

The friendly post-man bicycling his way into the by-lanes of the remotest villages was probably the most awaited person 40 years ago when he was villagers’ only link to the rest of the world.

While the Indian postal service could be increasingly growing redundant in delivering mail given the expansion of telecommunication networks, its network of dak ghars and dak babus can still be put to good use in its new avatar as — India Post Payment Bank (IPPB).

Last Saturday, the India Post Payments Bank, that seeks to leverage the infrastructure, personnel and reach of India Post, was formally launched.

On the day of the launch, IPPB had 650 branches and 3,250 access points, across the country. The plan is to link all the 1.55 lakh post offices to these branches by the end of 2018. Two pilot branches in Raipur and Ranchi, had been functioning since January 2017.

But since the IPPB is a payments bank, its operations will be restricted to those permitted for such banks. It can accept current and savings deposits up to a limit of ₹1 lakh. It can enable money transfers — both domestic and overseas — and direct benefit transfers, facilitate payments of utilities and other bills. It can also help channel savings by distributing insurance, mutual funds and pension products. While it cannot lend directly, it can act as a banking correspondent to other banks to provide credit in rural areas.

The bank proposes to operate through multiple channels such as physical branches, mobile apps, micro-ATM, SMS and IVR (interactive voice response).

Moving residents of rural India to formal banking has been a major challenge so far. According to World Bank’s FINDEX 2017 report, primary reasons why the unbanked chose not to transact through banks was: one, they do not have enough money to start banking; two, the cost and distance from bank branches were an impediment; three, they do not have an account because a family member already has one; and, four, lack of documentation and distrust in the financial system.

It’s clear that the IPPB has the capability to address at least two of these impediments. Those in remote hinterlands could find it easier to carry out banking transaction through the nearest post office or post-men.

The existing familiarity with post offices could help them overcome the hesitation of going to bank branches and dealing with bank personnel.

If rural savings begin moving into the banking system, it will hasten the shift from physical assets such as real estate and gold to financial assets. Freeing the farmers and other residents of rural India from the clutches of moneylenders will be yet another positive.

Besides these, India Post, which has been recording losses due to high operational expenditure and falling revenue, will get a fresh lease of life. The real estate that is owned by India Post can be leveraged for a more sustainable revenue stream.

If you are an urbanite or someone who uses mobile banking apps, you might not be too interested in the IPPB. But if you stay is a remote part of the country, with the nearest bank many miles away and poor internet connectivity, or if you are not comfortable with internet or mobile banking, you will find the IPPB quite convenient.

You can operate your savings or current account in your neighbourhood post-office. Those already investing in small savings through post offices will have no difficulty in carrying out other banking transactions at the post office.

IPPB could be a game-changer in financial inclusion, something the posterity will be thankful for.

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