Free Courses Sale ends Soon, Get It Now


PAYMENTS BANKS AND IPPB

28th April, 2022

Disclaimer: Copyright infringement not intended.

Context

  • The Union Cabinet has approved financial support of Rs 820 crore for India Post Payments Bank.

 

Objectives

The objective of the support is

  • To build the most accessible, affordable and trusted bank for the common man;
  • Spearhead the financial inclusion agenda by removing the barriers for the unbanked and;
  • Reduce the opportunity cost for the under banked populace through assisted doorstep banking.
  • The project supplement government of India’s vision of “less cash” economy and at the same time promotes both economic growth and financial inclusion.

What are Payment Banks?

  • Based on the recommendations of the Nachiket Mor Committee, Payments Bank was set up to operate on a smaller scale with minimal credit risk.
  • The main objective is to advance financial inclusion by offering banking and financial services to the unbanked and underbanked areas, helping the migrant labour force, low-income households, small entrepreneurs etc.
  • They are registered under the Companies Act 2013 but are governed by a host of legislations such as Banking Regulation Act, 1949; RBI Act, 1934; Foreign Exchange Management Act, 1999, Payment and Settlement Systems Act, 2007
  • India currently has 6 Payment Banks namely:
  1. Airtel Payment Bank,
  2. India Post Payment Bank,
  3. Fino,
  4. Paytm Payment Bank,
  5. NSDL Payment Bank and
  6. Jio Payment Bank.

 

Features of Payment Banks

  • They are differentiated and not universal banks.
  • These operate on a smaller scale.
  • It needs to have a minimum paid-up capital of Rs. 100,00,00,000.
  • Minimum initial contribution of the promoter to the Payment Bank to the paid-up equity capital shall at least be 40% for the first five years from the commencement of its business.

 

Activities that can be performed by Payment Banks

  • Payment banks can take deposits up to Rs. 2,00,000. It can accept demand deposits in the form of savings and current accounts.
  • The money received as deposits can be invested in secure government securities only in the form of Statutory Liquidity Ratio (SLR). This must amount to 75% of the demand deposit balance. The remaining 25% is to be placed as time deposits with other scheduled commercial banks.
  • Payments banks will be permitted to make personal payments and receive cross border remittances on the current accounts.
  • It can issue debit cards.

 

Activities that cannot be undertaken by Payment Banks

  • Payment banks receive a ‘differentiated’ bank license from the RBI and hence cannot lend.
  • Payment banks cannot issue credit cards.
  • It cannot accept time deposits or NRI deposits.
  • It cannot issue loans.
  • It cannot set up subsidiaries to undertake non-banking financial activities.

 

Advantages of Payment Banks

  • Expansion of rural banking and financial inclusion.
  • Expansion of the formal financial system.
  • Effective alternative to commercial banks.
  • Efficiently deals with low value, high volume transactions.
  • Access to diversified services.

 

Challenges faced

  • Lack of awareness among the masses to access these services.
  • Lack of incentives for the agents to involve themselves in these activities.
  • Lack of infrastructure and access to operational resources.
  • Technological hurdles.

 

IPPB

  • India Post Payments Bank, abbreviated as IPPB, is a division of India Post which is under the ownership of the Department of Post, a department under Ministry of Communications.
  • Opened in 2018 India Post Payments Bank is a 100% central government-owned entity.
  • The Payment bank was started with the vision to build the most accessible, affordable and trusted bank for the common man in India.
  • The main objective is to promote financial inclusion in a simple and secure manner at the customers' doorstep.
  • It aims to utilize nearly 1,60,000 post offices as access points and 3 lakh postmen and Grameen Dak Sewaks to provide doorstep banking services.
  • It delivers simple and affordable banking solutions through innovative interfaces available in 13 languages.

Services offered by the Bank

  • It offers savings accounts, money transfers and insurances through the 3d parties, bill and utility payments.
  • The Bank offers savings and current accounts up to a balance of 2 Lakh.
  • Customers can use QR code payments eliminating the need to remember account numbers, PINs and Passwords.
  • Unified Payments Interface (UPI)
  • Immediate Payment Service
  • National Electronic Funds Transfer
  • Real-time gross settlement
  • Bharat BillPay
  • Direct Benefit Transfer
  • RuPay Debit Card
  • AEPS (Adhaar Enabled Payment Service)

 

According to the data released in January 2022, the India Post Payment Bank had crossed the landmark of 5 crore customers.

https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1820526