AIR spotlight summary on “Launch of India Post Payment Bank”.
- The Government of India has launched the first postal payment bank which is an important part of the financial ecosystem in the country. Payment bank is a very good option for the people for online transactions. This segment will have low money deposit, low money transfer but high number of transactions. Down the line if there are focused players who can provide these services, it will ease people for doing their transactions. The other payment banks which have been provided licenses are Airtel and Paytm.
- People are aware that having a bank account is very important. The government through Jan Dhan accounts have offered attractive insurance cover. There has been a huge awareness campaign being created in the rural areas that it is important to have a bank account. With the Demonetisation move people have understood the necessity of having a bank account.
Usefulness of Payment Banks
- The existing bank branches are not present in remote areas; various geographical areas have no presence of public sector banks. If payment banks like post office which have large network come into banking segment it will encourage financial participation in remote areas, provide ease in the transactions and better services to the customers.
- An individual can hold a deposit of maximum 1 lakh rupees and payment banks cannot give loans to anyone. This is one factor which reduces the risk of payment banks. We have seen that cooperative and regional rural bank are not very well regulated and there have been cases where the cooperative banks have failed and customers have lost their money. In payment banks there are no such risks for the customers.
- There will be large number of transactions in quantity but in terms of value it won’t be significant. Payment banks is like a service industry offering services though mobile and digital platform. It is a low cost banking solution where transaction costs will be lower along with low infrastructure cost and low compliance cost.
- The services which payment banks offer are attractive that it bill payments, government’s direct benefit transfers, digital wallet facilities etc. It is the ease of doing transactions and ease of reach and familiarity are the benefits which payment banks provide.
Post office Payment Bank
- The road map disclosed by post office is that they will have 650 post office payment branches across the country. Post offices have a very large network. There are around 1,54,000 point of services from the post offices. There have been good relations between the post man and the rural masses. Many accounts already exist like National Saving certificates and small savings account and people are familiar with the operations. This gives a big impetus to India post payment bank.
- Post offices offer three types of accounts. They are Safal which is a regular account with basic banking transactions in a lower quantum of money. Sugam and Saral accounts which are for those people who do not have banking experience and used for transactions alone with limited facilities.
- Indian post offices have 35 crore customers and lave 1.54 lakh point of services. It is well capitalised company where 400 crore is being provided by the government as a guarantee and 400 crore provided by Department of posts and services.
- With Ujjwala scheme and DBT government is proving direct money transfer to the account of the beneficiary which has made people to open bank accounts. The post office payment bank will be in a good position to provide banking transactions.
- Competition is always healthy. It brings the efficiency in the system. The Indian population is around125 crore whereas there are only 1.25 lakh bank branches. So there is ample scope for competition to provide services in remote areas.
- The post offices will also provide online services in the form of NEFT, IMPS, AEPS and UPI. There is scope for large transactions in payment banks in these entire segments. Large banks can perform bigger roles of providing loans, accepting large deposits and cater to large quantity customers and the payment banks can cater to small customers.