Empowering Financial Inclusion: The Indian Post Payments Bank (IPPB)
Context:
Recently, the India Post Payments Bank launches WhatsApp Banking to empower customers pan-India to access banking services on their mobile phones in just a few clicks.
The Indian Post Payments Bank (IPPB):
- The IPPB established under the Department of Posts within the Ministry of Communication.
- Objective: To provide accessible, affordable, and trustworthy banking services to the common people of India.
- Aim: The IPPB envisions bridging the financial divide by extending its reach to the unbanked and under-banked populations, especially in rural areas, leveraging a vast network of 160,000 post offices, of which 145,000 are in rural regions, and a dedicated workforce of 400,000 postal employees.
- Headquarters: New Delhi
- Acceptance of Deposits: Can accept up to Rs 2 lakh from its customers. If the deposit exceeds this limit, the account is automatically converted into a post office savings account.
Payments Banks:
- Definition: A payments bank is similar to the traditional banks but it functions in a smaller scale and operates without engaging in credit risk. These banks were introduced based on the recommendations of the Nachiket Mor Committee.
- Objective: To extend payment and financial services to small businesses, low-income households, and the transient labor force, all within a secure, technology-driven framework.
- Regulation: The Companies Act 2013. However, payments banks are subject to various legislations like Banking Regulation Act, 1949; RBI Act, 1934; Foreign Exchange Management Act, 1999, and others.
- Capital Requirement: A minimum paid-up capital of Rs. 100 crores is mandatory for the establishment of payments banks.
- Payments banks can receive deposits up to Rs. 2,00,000 and accept demand deposits in the form of savings and current accounts.
- Funds received as deposits must be invested in secure government securities in compliance with the Statutory Liquidity Ratio (SLR) regulations, amounting to 75% of the demand deposit balance.
- The remaining 25% should be placed as time deposits with other scheduled commercial banks.
- Payments banks are prohibited from issuing loans and credit cards. Meanwhile, they are not permitted to accept time deposits or Non-Resident Indian (NRI) deposits.
- They are also not authorized to have subsidiaries for non-banking financial activities, maintaining their specialization in banking services.
