Suggesting that the payments bank ecosystem will have a “multiplier effect as far as banking is concerned”, finance minister Arun Jaitley said that going ahead, payments banks might compete with normal banking for small depositors. Jaitley was speaking after launching the pilot programme of India Post Payments Bank (IPPB) on Monday.
Under the project, IPPB has launched two branches in Raipur and Ranchi. By September, IPPB plans to have 650 branches in the country. “The idea is to have a branch in every district and make 3 lakh postmen come alive in payments bank function,” IPPB’s chief executive officer A P Singh said, adding that the payments bank will offer an interest rate of 4.5 per cent on deposits up to Rs 25,000, 5 per cent on deposits between Rs 25,000 and Rs 50,000 and 5.5 per cent on deposits between Rs 50,000 and Rs 1 lakh.
Jaitley said that the pattern in which the payments bank is being formed, the overhead cost is expected to be less, as the existing structure of the India Post network will be used. The paid-up equity of the new payments bank is Rs 800 crore, of which the government has already infused Rs 275 crore.
The finance minister also said that 1.55 lakh post office branches and the services of lakhs of postmen would be converted into banking operation with the launch of IPPB. He said that the demands received by the government to open banks in far-flung villages are conventionally for brick-and-mortar bank branches.
India Post became the third entity to receive the Reserve Bank of India (RBI)’s nod to launch banking operations on January 20, following Airtel Payments Bank and Paytm. Airtel Payments Bank has already commenced its operations, and is offering a high interest rate of 7.25 per cent to its depositors. In 2015, the RBI had granted an ‘in-principle’ approval to 11 entities, including India Post, to set up payments banks but later three entities withdrew their applications to start payments bank citing concerns with a sustainable business model.