India Post Payments Bank

INDIA POST PAYMENT BANK (IPPB)
In a bid to boost financial inclusion in the country, the RBI has given approval to the Department of Posts (DoP) to set up India Post Payment Banks or IPPB across the country.
With a network of more than 1.54 lakh post office branches with 90% of them being in rural areas, the IPPB is very well placed to serve the banking needs of the rural area hitherto underserved by the formal banking sector.
 

Significance of IPPB
As discussed above, the vast network the DoP has in the rural areas could be a game changer in ensuring financial inclusion to the rural poor. Unlike any formal bank, India posts already has adequate infrastructure in rural areas that can be utilized for banking services. It will be relying on a "Hub and Spoke model" to serve the banking needs of rural areas. The IPPB branches or control offices will be the back office while the post office branches which, for all practical purpose, will play the role of business correspondents for IPPB, will be its front office. Every post office branch will host an IPPB desk to source business.
The presence of India Post Offices in even remotest of the areas will deal with the problem of last mile connectivity as highlighted by the 'Deepak Mohanty Committee' on financial inclusion.
Old setup, ease of access, years of trust and familiarity of rural people will also prove beneficial to the success of India Post Payment Bank.
By setting up branches and ATMs across the work it will generate employment for thousands of people in the banking sector.
IPPB has tremendous possibilities as it can bring millions of individuals and small businesses into the formal banking channel by offering savings accounts of up to Rs100,000 and current accounts with a special focus on micro, small and medium enterprises, small merchants, village panchayats, self-help groups, etc.
It can also be the vehicle for the direct benefits transfer of social security payments of various ministries and pay utility bills, beside taking care of payments of various central and state governments and municipalities as well as colleges, universities and other educational institutions.
It can also play a major role in remittances—both domestic and cross-border—with a special focus on migrant labourers, low-income households and, finally, distribute third-party financial products such as insurance, mutual funds, pension and credit products.
 

Challenges
Success of IPPB is contingent upon a good business model and infusion of technology to lower the costs of service delivery.
The DoP has had two technology up-gradation missions since 2009 none of which has seen completion.
The 2015 annual report of India Post says these projects are in implementation phase and also outlines the achievements made so far, which include computerisation of the north eastern region, establishment of a data centre and a disaster recovery centre and networking 27,736 departmental post offices, rolling out core banking solution in more than 17,000 post offices, and setting up 500 ATMs, among a few other things.
In order to ensure the success of IPPB these missions must achieve their full scale completion as soon as possible.
Another challenge is to find a competent CEO for the IPPB. The Bank Boards Bureau is in the process of finding one.
With these challenges properly addressed the IPPB could turn out to be a game changer in the scheme of financial inclusion for the rural India.

By: Vishal