Can Only Love for Our Postman Ensure Success for India Post Payments Bank?

Wednesday, December 14, 2016

People have been waiting eagerly for the launch of the India Post Payments Bank or IPPB, the largest among the eight that are likely to start operations over the next few months. Eleven entities received the Reserve Bank of India’s (RBI’s) in-principle approval for floating payments banks but three of them have left the field.

Originally, the department of posts, or DoP, which has been running the post office savings bank, wanted to set up a universal bank. It had even applied for a licence. The proposal was discussed at the Public Investment Board, which examines the investment plans of various ministries worth at least Rs100 crore, and it advised DoP to set up a “differentiated bank”.

Accordingly, DoP applied to RBI, seeking a licence for a payments bank and got an in-principle approval on 7 September 2015. The bank has to be made operational by March 2017 but it seems the government wants it to be launched in January. This makes eminent sense in the wake of the demonetization drive— India’s financial sector is witnessing turbulence and the payments space is waiting to be grabbed with new ideas and innovations to give a big push to a cash-less economy.

IPPB will start with a Rs400 crore equity capital and a Rs400 crore grant from the government to set up a technology network in rural India. Incidentally, India Post, which is run by DoP, is not converting itself into a bank even as there have been many instances globally of post offices transforming themselves into banks. For instance, Germany’s Deutsche Postbank, originally a postal bank, is currently a private retail bank. In Japan, a large bank is run by its postal service but this is likely to be privatized next year.

Source: Livemint (link opens in a new window)

digital payments, fintech