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For all the millions of Indians surviving outside the banking system, a new ray of hope is all set to burst through the clouds. And it’s called the India Post Payments Bank. How’s that, you ask? Let’s dive in!

India Post Payments bankThe good old postman is all set to acquire a savvy role, thanks to the impending launch of the India Post Payments Bank. Snail mail is set to zip across the country with lightning speed, carrying the mandate of financial inclusion to each and every citizen, wherever they might be!

Let’s use an analogy here. Think of the human body. Think of all the veins and arteries as a grand network that reaches each and every nook and corner of the body. If all the veins, arteries and capillaries were laid out on a flat surface, end to end, the total length would be about 100,000 km long! If even a millimetre of this network were to be absent, it would tell immediately upon your health. Every corner of your body relies heavily on this magnificent network to sustain itself.

Now, let’s put it in context. Consider the length and breadth of India. From its northern tip to the southernmost, India clocks 3,214 km. The distance from east to west is about 2,933 km. Connecting this vast subcontinent is a network of expressways, national, state highways, district and rural roads. Presently, India has about 1,000 km of expressways, 97,991 km of National Highways and 1,67,109 km of state highways and 52,07,044 km of district, urban, rural and project roads.

Despite this, only 60% of Indian villages are connected by road. Which means that the remaining 40% are inaccessible to the world! Depressing though it sounds, there is one pillar of our society that reaches out to every village, come rain or hailstorm. The long forgotten icon of our society — the humble postman! A typical khaki-clad completely tanned, faceless human being, who crisscrosses the length and breadth of our country with an overstuffed sling bag and a slightly bent gait reaching out to every nook and corner with a primary objective of postal delivery.

The Indian Postal Service has a reach unparalleled by any other organisation in this country. With 1,54,939 post offices dotting the subcontinental landscape, out of which 90% are in rural areas, the postal service caters to the entire population of India. Much like our human arterial system, which reaches every nook and corner of our body.

India Post Payments BankIn order to capitalise on this humongous reach, the Government of India has announced the creation of the India Post Payments Bank (IPPB). Before you start fuming at the apparent redundancy of yet another government undertaking, let me tell you that this time, the focus and approach of the government is vastly different. The India Post Payments Bank has been incorporated as a Public Limited Company with 100% equity from the Government of India. The purpose of establishing this institution is four-fold:

  1. Help financial planning by providing information: Every person, irrespective of which remote corner they are located, knows the importance of financial information. This helps empower the citizen to take financial decisions and ensure they are not taken for a ride by unscrupulous elements. Even a simple understanding of the options available for utilisation of money will give the confidence to choose options that ensure a comfortable life for the family.
  2. Increase use of online channels: Rural India predominantly relies on cash for payments. This practice is all set to be overturned owing to the demonetisation initiative currently in progress. Income earned by a person, be it wages, pensions, scholarships, etc will reach the beneficiaries. Middlemen will be eliminated. This will ensure that the remotest Indian gets their due. Irrespective of where they are, no Indian citizen will not be deprived of their earnings.
  3. Bank account for all: Despite the expansion of bank networks in India, a significant portion of the populace have yet not been able to open a bank account. The goal of the India Post Payments Bank is to reach all sections of society, irrespective of where they are in India. Every individual will have the opportunity to avail government benefits and financial products. Eventually, the lifestyle of people is expected to be elevated by this move.
  4. Use postal network to widen reach: The grand plan is to use the existing resources of the Postal System to establish the banking network. The reach is already phenomenal, and the government intends to augment the available infrastructure to delve deep into the Indian heartland and reach the remotest villager. The target group of the India Post Payments Bank will be MSMEs, senior citizens, students, daily wage earners, migrant population, low income households as well as the unorganised sector.

 

Cutting the queue

Visit any branch of the State Bank of India in the first week of the month. You will find long queues snaking right out of the main doors and spilling out onto the street. Lakhs of migrant workers queue up each month to send their earnings to their near and dear waiting eagerly in their remote hometowns. The India Post Payments Bank is set to drastically change all that. Internet banking, mobile money transfer, mobile wallets, debit cards, ATMs, Instant Money Orders, PoS, MPos terminals, etc figure prominently on the India Post Payments Bank menu.

But wait. What on earth is a Payment Bank ?

According to the Reserve Bank of India, over 60% of the population is either unbanked or under-banked. A payment network that can cater to the needs of a humongous migrant work force will ensure financial inclusion across the country.

A Payment Bank CAN:

  • Transfer money and remittances through cellphones
  • Enable payment of utility bills
  • Issue debit cards
  • Transfer money directly into the payee’s bank account
  • Offer foreign exchange services
  • Raise deposits upto ₹1 Lakh from the public
  • Provide cashless transactions through cellphones

On the other hand, a Payment Bank CANNOT:

  • Offer Loans
  • Issue Credit Cards
  • Lend money
  • Set up subsidiaries to undertake financial activities

 

Not a new phenomenon!

The concept of a Payment Bank is not new; they exist in about 75% of the countries around the world. So it’s time the Elephant stirred here in our very own country! Furthermore, postal operators are among the star performers in countries like South Africa, South Korea, Japan, New Zealand, Morocco, Switzerland, France, etc. In a path-breaking initiative, the Reserve Bank of India had issued in-principal approval to eleven entities to establish and operate Payment Banks in August 2015. The list of licencees is as follows:

  • Aditya Birla Nuvo Ltd.
  • Airtel M Commerce Services Ltd.
  • Cholamandalam Distribution Services Ltd.
  • Department of Posts (under which the India Posts Payment Bank will function)
  • Fino PayTech Ltd.
  • National Securities Depository Ltd.
  • Reliance Industries Ltd.
  • Dilip Shantilal Sanghvi (founder of Sun Pharma, in partnership with Telenor and IDFC Ltd.)
  • Vijay Shekhar Sharma (CEO of One97 Communications, a.k.a PayTM)
  • Tech Mahindra Ltd.
  • Vodafone m-pesa Ltd.

Unfortunately, the Payment Bank bandwagon has had a cold start. In May 2016, Cholamandalam backed out. Subsequently, Dilip Shantilal Sanghvi followed suit. No reasons were given by the entities for calling off their Payment Bank forays. The Reserve Bank of India frowned at these withdrawals and threatened to impose penalties, since the above eleven were selected after due diligence of more than 40 potentials. And so, the saga continues. The remaining players are expected to start operations in this year. The India Post Payments Bank will become the largest banking network in the world, once commissioned.

 

Contemplating a career with India Post Payment Bank?

Keep a hawk-eye on the upcoming employment opportunities. Alternatively, IMS will alert you as and when the entrance examination notification is issued in future. The first stage of recruitment exams for the India Post Payments Bank were conducted on December 17, 2016 for Scale II-VI posts. And of course, there is more to come.

The  preliminary examination will test you on the English Language, Reasoning and Quantitative Aptitude in an objective format. Examinations will be conducted online. More information will be made available on the IMS website soon! So stay tuned!

 

 

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