Government hikes spending on postal payments bank to Rs 14.35 billion

As it looks to give a fillip for banking services in rural areas, the government has increased the outlay for setting up an India Post Payments Bank (IPPB) to Rs 14.35 billion.

The bank, which will be launched by Prime Minister Narendra Modi on September 1, is set to be a star-studded affair, with all the central ministers, chief ministers, Members of Parliament, and state assemblies doing simultaneous launches in all the 650 districts and 3,250 access points of the IPPB across the country. The launches in the districts will be preceded by a main event at Talkatora Stadium at 3.15 pm, where Modi will officially inaugurate the bank. Modi will address all the districts via videoconferencing.

The Union Cabinet has approved an additional Rs 6.35 billion for the IPPB, of which Rs 4 billion will be utilised on technology and Rs 2.35 billion on human resources. Earlier, the outlay for the bank was Rs 8 billion.

With the launch, the IPPB will have 650 branches and 3,250 access points across the country that will offer a range of products such as savings and current accounts, money transfer, direct benefit transfer, bill and utility payments, and enterprise and merchant payments.

These products will be offered through multiple channels such as counter services, micro automated teller machines, mobile banking app, short messaging service, and interactive voice response.

The other unique initiative to be started by the IPPB will be issuance of a quick response (QR) card to customers while opening their accounts. The card will have a unique QR code allowing customers to do various transactions without remembering the account number.

According to Communications Minister Manoj Sinha, with the QR code and Aadhaar-based authentication, all transactions will be hassle-free for customers. The bank will also be offering ‘doorstep banking’ facilities to the unbanked and provide handheld devices and smartphones to postmen.

Since a majority of the IPPB customers reside in rural areas, the QR card and doorstep banking promise to be game changers.

All the 155,000 post offices in the country will be linked to the IPPB system by December 31. The Cabinet has also approved payment of incentive/commission to the last-mile agents (postal staff and gramin dak sewaks) directly into their accounts for providing IPPB services.

A part of the commission, to be paid by the IPPB to the Department of Posts (DoP), will be used for upgrading the infrastructure.

The launch will significantly augment the reach and impact of the banking sector in the country. After the IPPB, the number of bank branches in the country will more than double – from the present 140,000 to more than 290,000. Similarly, the number of rural branches in the country will increase from the current 49,000 to more than 175,000, Sinha said.

The IPPB has built an integrated model with the DoP, under which post office savings bank account holders will be able to avail of additional services provided by the IPPB, by linking their accounts.

The IPPB, which has already been delayed by several months, is currently running pilot services in Raipur and Ranchi. The DoP was one of the 11 entities to get in-principle nod from the Reserve Bank of India in 2015 for setting up a payments bank. Many other entities, including Airtel, Fino, Paytm, etc, have already launched their services.