FREQUENTLY ASKED QUESTION ON IPPB
Concept of Payments Bank
1.
What is a Payments Bank?
A
Payments Bank is a “differentiated bank” set-up under the guidelines issued on
Nov 27, 2014 by the Reserve Bank of India (RBI) to further financial inclusion
for the underserved population by providing (i) current and savings accounts and
(ii) payments or remittance services to migrant labour workforce, low income
households, small businesses, unorganised sector entities and other users. This
is to be done by enabling high volume-low value transactions in deposits and
payments or remittance services in a secure technology-driven environment.
Please
click on this link for further details:
https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=32615
(RBI Guidelines)
2.
Why is a Payments Bank required?
A
vast majority of the rural population (over 60%, as per RBI), is still unbanked
or underbanked. An easily accessible payments network and universal access to
savings is fundamental to financial inclusion. At the same time, several
non-banking entities such as the Department of Posts (DoP), prepaid payment
instrument companies, business correspondent companies, etc., have had
reasonable success in facilitating payments and other select financial services
in urban areas. Their customers, however, face several limitations and
difficulties arising out of their nonbanking status. Of particular note amongst
these is the DoP which has a wide network and experience of handling financial
transactions, but does not have a banking license. Given their potential to
further the cause of financial inclusion, the RBI granted such entities a
differentiated banking license, i.e. a payments bank license, which enables
these entities to provide banking services other than credit. Credit and
insurance are as integral to financial inclusion as are other banking services,
and payments bank can offer these products as well but only in partnership with
other banks/ insurers and on a non-risk sharing basis.
3.
What is the scope and activities of the Payments Bank?
As
per the RBI Guidelines, the payments bank will be set up as a differentiated
bank and shall be permitted to set up its own outlets such as branches,
Automated Teller Machines (ATMs), Business Correspondents (BCs), etc. to
undertake only certain restricted activities permitted to banks under the
Banking Regulation Act, 1949, as given below:
- Acceptance of demand deposits, i.e., current deposits, and savings bank deposits from individuals, small businesses and other entities, as permitted. The payments bank will be restricted to holding a maximum balance of Rs. 1,00,000 per individual customer.
- Issuance of ATM / Debit Cards. Payments banks, however, cannot issue credit cards.
- Payments and remittance services through various channels including branches, Automated Teller Machines (ATMs), Business Correspondents (BCs) and mobile banking.
- Issuance of PPIs as per instructions issued from time to time under the PSS Act.
- Internet and mobile banking - The payments bank is expected to leverage technology to offer low cost banking solutions.
- Functioning as Business Correspondent (BC) of another bank – a payments bank may choose to become a BC of another bank, subject to the RBI guidelines on BCs.
- As a channel, the payments bank can accept remittances to be sent to or receive remittances from multiple banks under a payment mechanism approved by RBI, such as RTGS / NEFT / IMPS.
- Payments banks will be permitted to handle cross border remittance transactions in the nature of personal payments or remittances on the current account.
- Payments banks can undertake other non-risk sharing simple financial services activities, not requiring any commitment of their own funds, such as distribution of mutual fund units, insurance products, pension
- products, etc. with the prior approval of the RBI and after complying with the requirements of the sectoral regulator for such products.
The
payments bank may undertake utility bill payments etc. on behalf of its
customers and general public.
Please
click on this link for further details:
https://rbi.org.in/scripts/bs_viewcontent.aspx?Id=2900 (RBI Guidelines)
4.
Are there any restrictions on payments banks as compared to other commercial
banks?
Given
that their primary role is to provide payments and remittance services and
demand deposit products to small businesses and low-income households, payments
bank will initially be restricted to holding a maximum balance of Rs. 1,00,000
per individual customer.
Payments
banks cannot issue credit cards and cannot grant loan/ credit out of their own
books of accounts.
Apart
from amounts maintained as Cash reserve ratio (CRR) with RBI, Payments Bank will
be required to invest minimum 75 percent of its demand deposit balances in
Government securities/treasury bills with maturity up to one year and hold
maximum 25 percent in current and fixed deposits with other scheduled commercial
banks for operational purposes and liquidity management.
The
payments bank cannot set up subsidiaries to undertake non-banking financial
services activities. The other financial and non-financial services activities
of the promoters, if any, should be kept distinctly ring-fenced and not
comingled with the banking and financial services business of the payments
bank.
The
payments bank will be required to use the words “Payments Bank” in its name in
order to differentiate it from other banks.
5.
Has this model of Post office setting up a bank worked anywhere else in the
world?
Postal
operators are the leading financial services providers in over 75% of the
countries around the world. Some of the Post Banks in the world have been highly
successful, i.e. Japan, New Zealand, Switzerland, France, China, South Korea,
South Africa, Morocco to name a few.
Department of Post
6.
Why is DoP setting-up a payments bank?
DoP
has been successfully running the Post Office Savings Bank for the Ministry of
Finance. Setting up its independently owned bank is the next logical
progression. Based on feasibility studies and a subsequent Detailed Project
Report, the Department, in 2013, made an application to the RBI and a proposal
to the Public Investment Board (PIB) to set up a universal bank. However, the
Department was advised by the PIB to set up a “differentiated bank” under the
relevant guidelines. Accordingly when the RBI came up with the guidelines for
licensing of Payments Banks in November 2014, the Department of Posts made an
application for the same and got the in-principle approval in September 2015 for
setting up its payments bank.
The
setting up of the payments bank is therefore necessary in view of current market
realities and to ensure continued relevance of DoP’s products and services.
Among other things, the decision to set up the payments banks comes in the wake
of changes in the banking and payments landscape in the country. The payments
bank will ensure that the banking and payments services offered through the
postal network are well integrated and completely interoperable with the rest of
the banking and payments ecosystem and will leverage new age technology in line
with key technological advances in the banking sector such as unified payments
interface (UPI).
7.
What is the GOI’s outlook on DoP’s foray into banking?
In
the Union Budget of 2015-16, the Honourable Finance Minister made the following
announcement:
“The
Government is committed to increasing access of the people to the formal
financial system. In this context, Government proposes to utilize the vast
Postal network with nearly 1, 54,000 points of presence spread across the
villages of the country. I hope that the Postal Department will make its
proposed Payments Bank venture successful so that it contributes further to the
Pradhan Mantri Jan Dhan Yojana.”
In
his Independence Day speech at the Red Fort, on 15th August 2016, the Hon’ble
Prime Minister Shri Narendra Modi spoke about IPPB:
“The
Post Office is an example of our identity. We have revived and rejuvenated our
post offices. IT is now linked with the poor and small persons. If any
government representative gets the affection of a common man in India, it is the
postman. Everyone loves the postman and the postman also loves everybody, but we
never paid attention towards them. We have taken a step to convert our post
offices into payments banks. Starting with this, the payments bank will spread
the chain of banks in the villages across the country in one go”
8.
How will setting up the payments bank benefit DoP?
The
payments bank will not only drive revenues for DoP but also help in maintaining
DoP’s brand image and relevance in the current financial landscape that is
evolving rapidly. For e.g. Utility bill payments services of the IPPB as a
Bharat Bill Payment Operating Unit (BBPOU) will help DoP in increasing its
market share in the utility bill payments space and provide technology driven
services to customers. New age technology will enhance customer experience,
provide more options and help in serving the larger cause and vision of the GOI
i.e. to bring about financial inclusion for the vast unbanked and underserved
population.
9.
What will be the role and relationship of DoP with the proposed payments
bank?
The
payments bank will be 100% owned by the Government of India via DoP, and will
have an independent board of directors with representation from DoP and other
stakeholders from within the Government of India to ensure strategic alignment
with the overall objectives of the DoP and the Government of India.
The
post offices at different levels will be the main customer touch points for the
bank’s services. A close liaison between the bank and DoP staff at the access
points will be maintained on a regular basis at the branch level for success of
the delivery model .
India Post Payment Bank (IPPB)
11.
How many branches are likely to be opened?
IPPB
is slated to have 650 branches at district headquarters. All post offices across
the country will function as customer access points for IPPB.
12.
What will be the USP for IPPB?
The
latest payments and banking technology, easy to use interface, the trusted
network of the post office and its dedicated staff with a local connect will be
the USP of the IPPB. IPPB will bring in innovative services and interface for
its target customer segments in all areas. The accessibility and ease of use of
services through a combination of modern technology and the widespread DoP
physical network, capable of providing door step services will make it a unique
payments bank. Through a combination of physical and digital channels, payments
bank will build the most accessible bank in the country especially in rural and
underserved areas of the country.
13.
How will IPPB employees be recruited? What are the various mechanisms through
which they get selected?
Various
options regarding the recruitment and selection of IPPB employees have been
considered. These include deputation from DoP or other public sector banks,
direct recruitment through IBPS, contractual arrangements for certain skilled
staff positions etc.
DoP’s role in IPPB
14.
How will IPPB function?
IPPB
has been set up as a Public Limited Company under the Department of Posts with
an independent Board of Directors. It will be headed by a Managing Director and
CEO, and will set up a corporate head quarter and approx. 650 branches to manage
its functions on a day to day basis. IPPB will leverage the physical and IT
infrastructure of the Post office and be set up on a lean operating model. It
will focus on low-cost, low-risk, technology led solutions to extend access to
formal banking.
Products and Services
15.
How will the products and services of IPPB be different from DoP’s payment and
remittance products?
DoP
payments and remittances products are based on the basic money order services
adapted for the digital age. While IPPB will provide the same benefits of
payments and remittances to the customers, by adopting newer, efficient
processes and technologies such as mobile based payments, digital wallets and
innovative payment and remittance products that are continuously emerging in the
market today. Combined with doorstep banking transactions and easy to use mobile
and internet banking options IPPB will significantly improve accessibility of
its services. Additionally, IPPB products will be well integrated and
inter-operable with the rest of the banking industry.
IPPB
will drive the benefits of financial inclusion by bringing a host of financial
products to suit the needs of different strata of society with special focus on
the marginalized sections and citizens in rural areas.
Product
innovation will be a continuous exercise to expand the bouquet of services
adapting to the evolving needs of its customers technologies and the rapid
advancements in communication and payments
16.
Will there be an impact on POSB?
Apart
from savings account with up to INR 1,00,000 in deposit, the products offered by
IPPB are different from POSB products. POSB savings accounts do not have any
ceiling limit unlike payments bank savings account. On the other hand payments
banks can offer current accounts for use by businesses and institutions whereas
POSB does not offer these accounts. Other kinds of deposits under POSB are
unique to it and will not be on offered by the payments bank. POSB accounts are
mainly savings instruments.
Simply
put while POSB is more focussed on returns from small savings, IPPB will be
focussed on transactions. Thus there will be an inherent synergy between the two
and each will complement the other.
17.
How will IPPB improve disbursement of subsidies?
IPPB
is being set up by the GoI with a primary focus of improving the Direct Benefit
Transfer of various subsidies. IPPB will be providing a robust technology
platform for DBT disbursements and build a strong reporting mechanism. By
channelling a majority of subsidy disbursements through its combined network,
DoP-IPPB combine will significantly increase its current market share.
Customers
18.
Who will be the target customer of IPPB?
Apart
from the existing customers of the DoP, IPPB will focus on the underbanked and
unbanked population in different parts of the country. It will also try to
target services for MSMEs, senior citizens, students, migrant population, low
income households, unorganized sector and other groups with special service
requirements.
19.
How will the customer choose between the savings account of POSB and IPPB?
Both
POSB and IPPB will have different branding and the product features will be
quite different. At time of signing up, customers will be clearly told what the
product features are and customers will be able to choose the product of their
choice.
Given
the difference in purpose of the two accounts, the POSB customers can be
encouraged to open an IPPB account for managing their fund flow including bill
payments, remittances to other family members, businesses etc. depending on
their needs. Customers focusing on savings may prefer to have their deposits
with POSB and transact through their IPPB account as per requirements.
Customers
will be given the option to channel money from their IPPB accounts to any of the
POSB schemes. For example, an IPPB customer will be able to use money in his
account to open and service a RD/ TD/ SSY or any other POSB account. Thus both
IPPB and POSB can synergistically serve the customers.
Overall
20.
I would like to know more and contribute to the IPPB journey. How can I do
that?
You
can send your questions and suggestions to pbi-project(at)gov.in or call us at
+91 11 23096008 and check for regular updates on https://www.facebook.com/ippbonline/ and http://utilities.cept.gov.in/dop.
Courtesy:
IPPB
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