The department of posts’ payments bank will be called India Post Payments Bank (IPPB). The entity will commence commercial operations by September 2017 and get an approval from the Reserve Bank of India (RBI) by March 2017, the government said in a release.
It added that the IPPB will set up 650 payments bank branches. It will be further bolstered by linked post offices and alternative channels. To give context, the largest bank in the country is State Bank of India with over 13,000 branches. The total expenditure on the project is Rs 800 crore with the government owning 100% stake in the entity.
In January, as part of its payments bank operations, the department of posts said it would install 1,000 ATMs and a core banking solution at 25,000 post offices by March 2016.
Apart from accepting deposits, a payments bank can offer remittance services through branches, ATMs, Business Correspondents and mobile banking. They can also become business correspondents of other banks.
Focus on e-commerce and banking
In 2014, the Indian government had set up a task force to explore ways of using the post office network in the country to provide last mile services. The task force report (pdf) has suggested that three separate subsidiaries be formed as part of a holding company under the Postal Department, that would focus on services in e-commerce, banking and insurance segments. Each of these subsidiaries would be operated as Strategic Business Units (SBUs).
Eight applicants remain
The department of posts got an ‘in principle’ nod to set up a payments bank in August last year along with 11 other companies. Of which three have surrendered their approval to the RBI. Earlier this month, Tech Mahindra and Sun Pharma promoter Dilip Shangvi announced that they would not be pursuing a business in payments bank. Dilip Shangvi had partnered with IDFC Bank and Telenor for the payments bank.
In March this year, Cholamandalam Investment and Finance Company had decided to abandon its plans to set up a payments bank, saying that the decision came from the board after “considering competition and other factors, including the long gestation period”.