New Contours of Financial Inclusion

Though Reserve Bank of India (RBI) after shortlisting 41 applicants, gave in-principle approval to the opening of 11 Payment Banks in August 2015, however, only six banks could start active functions till date after fulfilling the conditions attached and completing the formalities in this regard; and recently started India Post Payment Bank (IPPB) is one of these. Bharti Airtel started its first Payment Bank in March 2017, followed by four others, before IPPB. Government of India had announced starting of a Payment Bank based on its wide spread postal network in its Budget on February 28, 2015. In his Budget Speech the Finance Minister had made announcement to this effect. However, IPPB could see light of the day on September 1, 2018 when Prime Minister Shri Narendra Modi launched it at Talkatora Stadium of Delhi. “IPPB has been envisioned as an accessible, affordable and trusted bank for the common man, to help speedily achieve the financial inclusion objectives of the Union Government. India Post Payment Bank offers several facilities and benefits to common citizens,” the Prime Minister said.

It is notable that Indian postal department is already providing banking services to the people in the remotest areas, but for their operations, customers have to physically visit post office and carry on transactions related to deposits and withdrawals physically. However, with start of IPPB, opening of the saving bank account could be undertaken with an App, linking the same with Aadhar and PAN number, which enables citizens to open paperless accounts in a matter of minutes and in essence this Saving Account would be digitalised online account.

Deposits and withdrawals could be made sitting at home and bank would come to customer’s house in the form of ‘Postman’. This Saving Account could have deposit of up to one lakh rupees (which is the condition attached with Payment Bank); however, any balance above rupees one lakh would automatically be swept to normal Post Office Saving Bank Account (POSA). This account could be opened with zero balance. The IPPB offers a regular saving account, digital saving account and basic saving account. All of these accounts provide 4 per cent per annum interest. The IPPB also offers current account facility to the small merchants/ Kirana stores and individual businessmen.

For people with small savings, IPPB assumes significance as there is no requirement of minimum

balance. It is notable that people, who opened zero balance saving bank accounts under Jan Dhan Yojna, after they turned normal deposits with reaching a threshold limit of deposit, faced problem of automatic deduction of charges for not maintaining minimum balance. Deposits under IPPB will not face such a problem, as there are no conditions attached to the same, though they continue to enjoy benefits of bank deposits.

Though there is no ATM or Debit Card issued in these deposits on the lines of bank deposits, QR Card issued with this account fulfils the task which is better than ATM Card in many ways. There is no chance of any fraud, which may happen in case of ATMs, in case of loss or misuse of the same, because this account is operated with QR and biometrics. Customers need not go to the ATM or bank, bank itself will come to customers physically in the form of Postman, who can collect or disburse cash based on customer’s unique QR code. No two QR codes can be similar and therefore there is hardly any chance of fraud. IPPB provides instant fund transfer through IMPS (Immediate Payment Service) and also easy bill payment and recharges. Remittances and money transfers, direct benefit transfers, bill & utility payments, and enterprise & merchant payments are all possible with IPPB.

Main benefits of Jan Dhan Accounts were mobilisation of small savings, Direct Benefit Transfers (DBT), easy transfer of funds etc. All these benefits will be available with IPPB with greater ease, thanks to wide coverage of Indian Postal Network and payments through widespread small merchant network. Despite growth of bank branches in the country, their reach is yet to match the level of post office network. Deep penetration of Postal Department is explained by 1,30,000 rural post offices in the country, with staff trained to carry banking activities; whereas total number of bank branches in rural areas is less than 50,000. Moreover there are more than 3 lakh Gram Dak Sewaks (GDSs), who may provide assisted banking services in the rural and remotest areas (Initially first phase of the bank with 650 branches and 3250 post offices as access points was inaugurated on 1 September 2018). Therefore, for extending banking and payment services in remote rural areas, IPPB may prove to be immensely beneficial to students, senior citizens, farmers, housewives, kirana & small merchants; helping India to achieve less cash economy at much lower cost.

As rural and remote area people are more familiar with post offices, IPPB could help them overcome the hesitation of going to bank branches and dealing with bank personnel. With rural savings moving into the banking system, it will hasten the shift from physical assets such as real estate and gold to financial assets. It may also free the farmers and other residents of rural India from the clutches of moneylenders.

For long, due to shifting of postal business to courier services, India Post has been recording losses due to fast falling revenue and high operational cost. With start of IPPB, the real estate, other assets and manpower of India Post can produce more sustainable revenue stream.