Post office solutions: the challenges facing India Post Payments Bank

Post office solutions: the challenges facing India Post Payments Bank

News

1. PM Modi has launched the India Post Payments Bank (IPPB)

Important Facts

2.  IPPB will operate under the aegis of Department of Post, Ministry of Communications and Information Technology.

3. The Government of India owns 100% equity of the IPPB.

4. It has been registered as a public limited company under Companies Act, 2013 and Section 22 of Banking Regulation Act, 1949.

5. It can accept deposits of up to Rs 1 lakh from the customers beyond which the account will automatically get converted into a post office saving account.

6. IPPB has teamed up with PNB and Bajaj Allianz life Insurance for providing third party products like loans and Insurances.

7. IPPB Plans to charge for financial services to generate revenue.

8. Indian Postal System network includes

• 55 lakhs post offices (1.3 lakhs are in villages)
• 650 Bank branches,
• 3250 access points
• more than 3 lakh postal employees

Benefits of IPPB

9. Financial Inclusion:

• Promotes financial inclusion in rural and unorganized sector of the economy.
• Grameen Dak Sewaks could be the last mile agents.
• Since IPPB is 100% government owned, it will be less profit driven and will focus more on financial Inclusion.

10. Revamps Postal System:

• Harnessing of the vast postal network will reinvigorate the moribund Postal System.

11. Remittance

IPPB will enable remittance services in a secured technology driven environment.

12. Offline presence

IPPB will have offline presence and thus more visible and accessible.

Challenges

13. Payment bank business model

• Restrictions on the functioning of payment bank can hamper growth of IPPB.
• Difficult to earn profit to survive as standalone business entity.
• The Payment bank model till now is untested.

14. Competition from private payment banks:

• They have a head start and it will be difficult to compete with them.
• They are more adaptive to business realities and customer friendly.

15. Department of post had revenue deficit of Rs 11000 crore till 2017 and If not managed properly, it can negatively affect the functioning of IPPB.

Conclusion

16. IPPB is the logical extension of the Financial Inclusion project like Jan Dhan Yojana.

17. Launch of IPPB has been hailed as the ‘Second wave of Financial Inclusion’.

18. If Postal payment bank succeeds, it could indeed usher in a new era of rapid financial inclusion across India.