India Post gets Payments Bank licence from RBI

India Post on 30 January 2017 got the licence from the Reserve Bank of India (RBI) to work as a Payments Bank. Following this, India Post Payments Bank Limited commenced its operations officially.

Under the Department of Posts (Union Ministry of Communications and Information Technology), India Post became the third entity after Bharti Airtel and Paytm to receive final payments bank licence to roll-out banking operations commercially.

Highlights of the India Post Payments Bank Limited
• India Post Payments Bank (IPPB) commenced its operations by rolling out pilot services in Raipur and Ranchi.
• The bank will offer an interest rate of 4.5 per cent on deposits of up to Rs 25000; 5 per cent on deposits of Rs 25000 - 50000 and 5.5 per cent on deposits of Rs 50000 - 100000.
• The paid up equity of the new bank is Rs 800 crore, of which the government has already infused Rs 275 crore.
• The idea behind setting up IPPB is to have a branch in every district and make 3 lakh postmen come alive in payment bank function.
• Around 1000 ATMs of India Post will now be transferred to IPPB.

About Payments banks
• The new model of Payments Bank allows mobile firms, super market chains and others to cater to banking requirements of individuals and small businesses.
• It will be set up as a differentiated bank and will confine its activities to acceptance of demand deposits, remittance services, Internet banking and other specified services.
• Payments banks can accept deposits up to Rs 1 lakh per account from individuals and small businesses.
• They can issue ATM/debit cards but not credit cards.
• They can also issue other prepaid payment instruments.
• Non-resident Indians (NRIs) are not be allowed to open accounts in payment banks.

Background
Presently, the department of post has an existing network of around 155000 post offices. India Post plans to open over 650 new branches for the payment bank.

In 2015, the RBI granted in-principle approval to 11 entities, including the Department of Posts, to set up payments banks and proposed to give such licences on tap basis in future.

Following this, Airtel launched its commercial operation across India with an investment of Rs 3000 crore and is offering interest rate of 7.25 per cent on deposits. While, Paytm rolled out payments bank with an initial investment of about Rs 400 crore.