INTRODUCTION

India Post Payments Bank (IPPB) is a 100% government owned payments bank operating under
the Department of Posts, Ministry of Communications, which aims to utilize all of India's
155,015 post offices as access points and 3lakh postal postmen and Grameen Dak house to
house banking services. The first phase of the bank with 650 branches and 3250 post offices as
access points was inaugurated on 1 September 2018.Over ten thousand postmen have been roped
into the first phase. The Prime Minister of India, Narendra Modi, at the launch of the India Post
Payments Bank, in New Delhi on September 01, 2018. The Minister of State for
Communications (I/C) Manoj Sinha, the Secretary (Post), Ananta Narayan Nanda and IPPB CEO
and MD Suresh Sethi are also seen.

The Reserve Bank of India and the Government of India have been taking many initiatives to
promote financial and deepening access to financial services in India . Special scope given to
people in rural areas, low-income groups, migrant workers and small businesses. Many
initiatives have been launched, such as the Pradhan Mantri Jan Dhan Yojna (PMJDY), the
Digital India Campaign, launching of electronic fund transfer mechanisms such as NEFT and
RTGS, and promoting mobile payment etc. The setting up of payments banks is the latest
initiative taken up by the RBI and the Government of India. The RBI has set up the concept of
Payment Banks is drive towards financial inclusion in India, especially in the rural areas, mainly
focusing on low-income groups and small businesses. These banks are mainly being set up to
focus on low value-high volume transactions.

In Sep 2013 the Reserve Bank of India constituted a committee headed under the chairmanship
of Dr. Nachiket Mor to study 'Comprehensive financial services for small businesses and low
income households'. The objective of the committee was to propose measures for achieving
financial inclusion and deepening access to financial services.

The committee submitted its report to RBI in January 2014. One of the key suggestions of the
committee was to introduce specialised banks or ‘payments bank’ to cater to the lower income
groups and small businesses so that by January 1, 2016 each Indian resident can have a global
bank account. With payments banks, RBI seeks to increase the penetration level of financial
services to remote area of the country. On 19 August 2015, the Reserve Bank of India gave "in-
principle" licenses to eleven entities to launch payments banks out of 41 application.

A new model of banks conceptualised by the Reserve Bank of India (RBI). A payments bank is
like any other bank, but operating activity restricted to smaller scale without involving itself to
any kind of credit risk. Unlike other banks it can carry out most banking operations but cannot
advance loans or issue any credit cards. Presently acceptance of demand deposit is restricted to
Rs 1Lakh per customer and may be increased further, it also offers remittance services, mobile
payments/transfers/purchases and other banking services like ATM/debit cards, net banking and
third party fund transfers etc.

Presently There are six payment banks actively started operating out of given license to 11
payment banks hence, more would be coming up. on Aug 2015 India Post got license to run a
payments bank from Reserve Bank of India. On Aug 2016 it was registered as a public limited
government company for setting up a payments bank. After the success of pilot project of IPPB
was inaugurated on Jan 2017 at Raipur and Ranchi. The first phase nationwide inauguration
happened on September 1, 2018 onwards.

India Post Payments Bank has been incorporated as a Public Limited Company under the
Department of Posts with 100% Government of India equity. Operating under the Department of
Posts, Ministry of Communication, which plans to leverage the unparalleled reach of the India
Post network to achieve a Pan India roll out of 650 branches by early next year.

The Indian financial system has witnessed some remarkable changes since 1991.Banking sector
is one sector which has been performing really well after liberalization, and success can truly be
associated with major banking reforms taken by RBI some major technological changes that
have take place over years.

Financial inclusion is the delivery of financial services at a minimum cost to the lower income
segments of society in comparsion to financial exclusion where those services are not available.
Around 2 billion of world‟s population have no access to various types of financial services
which are provided by different financial institutions like Banks, Mutual funds, Life insurance
companies. In India, this term financial inclusion was first mentioned in Annual policy of RBI in
April 2005, which was presented by Y venugopalreddy, then governor of RBI. The main purpose
of setting up of payment banks is to enhance financial inclusion. Payment banks are new model
of banks conceptualized by the RBI. These banks can accept a restricted deposit which is
currently limited to INR 1 Lakh per customer and may be increased the further. These banks
cannot issue loans and credit cards. Both current account and savings account can be operated by
such banks. It can issue services like ATM cards, debit cards, online banking and mobile
banking. Airtel has launched India‟s first payments bank. Paytm is the second such service to be
launched.

With around 60 percent of the population still under banked, a need was felt for establishment of
a Payments Bank which specializes in providing a channel for savings and for remittance and
payment services. Payments Bank is a specialized bank formed with differentiated bank license
and has limited purpose. The primary objective of setting up of payments banks is to further
financial inclusion by providing small savings accounts and payments or remittance services to
unbanked segments of population such as migrant workforce, low income households, small
businesses and other unorganized entities. It facilitates a large volume of low value transactions
in deposits and payments or remittances, in a secure technology-driven environment. As per the
Reserve Bank of India Guidelines for Licensing of “Payments Banks” issued in November 27,
2014, the following are the guidelines:

i. The payments bank will be registered as a public limited company under the Companies
Act, 2013 with a minimum equity capital of Rs. 100 crore. It is a Scheduled bank and
will be governed by the provisions of the Banking Regulation Act, 1949, Reserve Bank
of India Act, 1934, Foreign Exchange Management Act, 1999, Payment and Settlement
Systems Act, 2007, Deposit Insurance and Credit Guarantee Corporation Act, 1961,
other relevant Statutes and Directives issued from time to time.
ii. It can be promoted by existing non-bank Pre-paid Payment Instrument (PPI) issuers
authorized under the Payment and Settlement Systems Act, 2007 and other entities such
as individuals, professionals, Non-Banking Finance Companies, mobile telephone
companies, super-market chains, companies, real sector cooperatives and public sector
entities.
iii. Maximum permitted balance in current or savings account is Rs. 100,000 per individual
customer with aggregate withdrawals and transfers in a month not exceeding rupees ten
thousand.
iv. Its activities are restricted to acceptance of demand deposits, provision of payments and
remittance services. It cannot undertake lending activities. It can issue ATM / Debit
Cards, but cannot issue credit cards.
v. It can use various channels such as branches, Automated Teller Machines (ATMs),
Business Correspondents (BCs) and mobile banking, etc. for providing the
aforementioned services. To leverage technology for providing services at low cost, it
must have enabling systems in place, collaborations with third party service providers.
vi. It can undertake other activities such as distribution of mutual fund units, insurance
products, pension products, arrangement of utility bill payments etc. on behalf of its
customers and general public.
vii. It is required to maintain 25% of its current and fixed deposits as Cash Reserve Ratio
(CRR) with RBI, invest minimum 75 per cent of its demand deposit balances in
Government securities or Treasury Bills which are recognized by RBI as eligible
securities for maintenance of Statutory Liquidity Ratio (SLR).

Thus payments bank is a new kind of bank promoted with the express objective of
extending banking facilities to the unbanked. Since it caters to small depositors having
limited means, their accounts can be opened as no frill accounts with no minimum
balance, while the maximum balance can be Rs. 1 lakh. It cannot lend or issue credit
cards. Hence, the main source of income is transaction fees and not interest spread. To be
commercially viable, it has to provide services at low cost and in large scale. For this
purpose, digital platforms such as mobile phones, debit cards, Point of sale devices, etc.
would be used along with physical network of branches. India post is one of the eleven
entities to secure license from RBI for establishment of payments bank. It is expected to
provide small savings accounts, payments and remittances to migrant workforce, low
income households and others in rural and remote areas through linkages with its
network of post offices across the country.
 Features of IPPB

Launch Date: 1st September 2018

Type of Bank: Public Sector

Location: Services will be provided through 1.55 lakh post offices which would be acting as
access points

Which employees will provide services: 3.0 lakh postal employees in every district, town and
village

Government Share: 100%

Security: Transactions done through IPPB will happen on a secured technology driven
environment.

Types of accounts individual can open: Four types of accounts can be opened broadly
categorized as:

Savings Account:

 Regular Account – Safal: Minimum deposit is Rs. 100

 Basic Savings Bank Deposit Account (BSBDA) – Sugam: There is no minimum balance
required.
 BSBDA Small – Saral: There is no minimum balance required.

Current Account:

 Current Account
 Number of branches to be opened: 650. Two branches are already functioning.

Where are IPPB branches currently in operation: India Post Payments Bank (IPPB) branches
are present in Ranchi and Raipur. And another 648 branches would be opened

Features of IPPB

Launch Date: 1st September 2018

Type of Bank: Public Sector

Location: Services will be provided through 1.55 lakh post offices which would be acting as
access points

Which employees will provide services: 3.0 lakh postal employees in every district, town and
village

Government Share: 100%

Security: Transactions done through IPPB will happen on a secured technology driven
environment.

Types of accounts individual can open: Four types of accounts can be opened broadly
categorized as:

Savings Account:

 Regular Account – Safal: Minimum deposit is Rs. 100

 Basic Savings Bank Deposit Account (BSBDA) – Sugam: There is no minimum balance
required.
 BSBDA Small – Saral: There is no minimum balance required.

Current Account:

 Current Account

Number of branches to be opened: 650. Two branches are already functioning.

Where are IPPB branches currently in operation: India Post Payments Bank (IPPB) branches
are present in Ranchi and Raipur. And another 648 branches would be opened Number of
access points: 3,250. These access points will be located at post offices.

What services can be availed: It would be a digital bank and offer services similar to a
normal bank such as:

 Remittances (money transfer and receiving) within the same bank or other. Funds transfer can be
done via IMPS, NEFT, AEPS, UPI and *99#.
 Doorstep banking
 Mobile banking
 Phone banking
 SMS banking
 Missed call banking
 ATM cum debit card
 Mobile alerts
 Branch banking

Maximum balance that can be kept: Rs. 1 Lakh in Safal and Sugam account. Rs 50,000
in Saral account.
 Is it mandatory to have post office account for IPPB: No.

Other Benefits of India Post Payment Bank:

 Government will give MGNREGA wages, benefits transfer such as gas and other subsidies, pension
to retired government employees, doorstep banking etc.
 Direct benefits transfer would be Aadhaar based
 Money transfer would be simple & secure, instant and available 24×7
 Individuals can use the IPPB app for making utility bill payments (telephone, electricity, etc.),
mobile sim recharges.
 Postal savings account will be linked to IPPB
 Insurance, mutual fund, credit products, pension and other financial services can be availed through
India Post Payments Bank.
 Nominee can be added
 10,000+ doorstep service providers
 24×7 multilingual customer support
 Joint account cannot be opened
 There is no minimum balance required

LITERATURE REVIEW
Payment banks increasing impact of financial inclusion drive by playing significance
role in implementing government's direct benefit, transfer schemes, where subsidies on
health care , education and gas are paid directly to beneficiaries account .It may lead
competition between traditional and payment banks will lead to widening and
improvement in quality of banking services are at reduced costs and which may finally
leads results in financial inclusion (Dr.V. Ramesh Naik ,P.Firdous,P.Harika)
Scope of Payment banks are a good way of reaching the masses for the even the smallest
of payment at the odd hours, which defiantly makes the payment systems viable for the
masses. Also as Indian system is that the masses majorly deal in cash and this system
becomes the pseudo cash handling system and so it is this that digitally captures even the
smallest transactions.( Madhavi Damle, Pushpendra Thenuan, Jimit Raval).

Payment bank is a revolutionary step said that, it’s important to remember that payments
banks are different from commercial banks in a number of ways. And while the Minister
of State for Communications claims that this will launch the ‘ second wave of financial
inclusion’, the first wave of the Pradhan Mantri JanDhan Yojana is yet to be effectively
implemented. (Major Sinha)

It is a high-volume low margin game and the key is to use scalable technology to reduce
cost of customer acquisition and service delivery. Payments banks have to adopt a
nimble cost structure to make this business viable in the long run (Anand
Ramachandran,CFO of Paytm)

The study carried out Emphasis on advancement in digitalizing banks, the rural
population remained unaware due to unregulated regional rural banks as well as the rural
branches of commercial banks. How payment bank will play a role in strengthening and
enhancement of financial inclusion and financial literacy. Payment banks must maintain
a fine balance between their costs and benefits (J.Vaishnavi, N.Shruthi)

These type of banks benefit in cash digitisation. Nearly 90% of transactions in India are
typically cash based, but demonetisation has given a huge push to payments banks with
its emphasis on digital transactions. “We are already witnessing new set of customers,
including vendors, grocers and small business owners, opting for cashless payments. The
adoption level will only increase going forward, and payments banks will facilitate this
digital transformation,” says Gupta.
 Kesavan (2015) attempted to understand changes in the banking sector over a period of
time and observed that innovative and new services are being provided through the
establishment of Payments Bank. It would be beneficial to the customers as well as to the
banking system as a whole.

Mehra (2015) observed that establishment of Payments Bank represents an effort to

redefine banking in India. It would enable poorer citizens who primarily transact in cash
to take their first step into formal banking and accelerate India‟s journey to cash less
economy.

Merchant (2015) observed that Payments Bank will pave the way for financial inclusion
through a combination of physical branches and digital platforms. Payments Bank with
low cost innovative and convenient service, adequate capital would immensely benefit
the consumer. However, it would have a negative impact on small and medium sector
banks in terms of their market share and incremental deposit growth. Large public sector
banks would also suffer loss of market share in payments transactions and Government
transfers.

Kohil and Patel (2016) were of the view that though credit is important, payments and
savings are also central to efficient financial system. Payments Bank would help in
channelizing savings of unbanked population by providing last mile connectivity in rural
areas where physical access is difficult. Such savings could be used for productive
purposes which would contribute to the growth of the economy. Its profitability is
directly linked to economies of scale and identified the following factors as essential for
it to succeed: designing right products, patient capital with adequate levels of investment,
strong marketing and well managed distribution networks.

NEED OF STUDY

Moving residents of rural India to formal banking has been a major challenge so far. According
to World Bank’s FINDEX 2017 report, primary reasons why the unbanked chose not to transact
through banks was: one, they do not have enough money to start banking; two, the cost and
distance from bank branches were an impediment; three, they do not have an account because a
family member already has one; and, four, lack of documentation and distrust in the financial
system.

It’s clear that the IPPB has the capability to address at least two of these impediments. Those in
remote hinterlands could find it easier to carry out banking transaction through the nearest post
office or post-men.

The existing familiarity with post offices could help them overcome the hesitation of going to
bank branches and dealing with bank personnel.

If rural savings begin moving into the banking system, it will hasten the shift from physical
assets such as real estate and gold to financial assets. Freeing the farmers and other residents of
rural India from the clutches of moneylenders will be yet another positive.

Besides these, India Post, which has been recording losses due to high operational expenditure
and falling revenue, will get a fresh lease of life. The real estate that is owned by India Post can
be leveraged for a more sustainable revenue stream. People are unaware about the post office
payment banks so there is a need to study about this and make people aware about the services
provided by IPPB so

If you are an urbanite or someone who uses mobile banking apps, you might not be too interested
in the IPPB. But if you stay is a remote part of the country, with the nearest bank many miles
away and poor internet connectivity, or if you are not comfortable with internet or mobile
banking, you will find the IPPB quite convenient.

You can operate your savings or current account in your neighbourhood post-office. Those
already investing in small savings through post offices will have no difficulty in carrying out
other banking transactions at the post office.

IPPB could be a game-changer in financial inclusion, something the posterity will be thankful
for.