The India Post Payments Bank will be set up 650 branches by the end of April 2018 communications minister, Manoj Sinha told the parliament. The deadline for achieving that target had earlier been set for September 2017. According to the minister, India Post Payments Bank (IPPB) is anticipated to acquire approximately 80 million customers in a span of five years from its launch.

Why was the original deadline missed? While there is no mention of the delay in the minister’s reply, delays in system integration may have played a role.  EIT Services India Pvt. Ltd was brought on board as a system integrator as late as 14 August 2017, less than a month from the deadline.

Will the new deadline be adhered to? With less than a month and a half to go and only around 528 managers on board for the proposed 650 branches, how does India Post plan to get the remaining personnel? Shouldn’t the recruitment process be over by now, followed by extensive training? All of this brings us to question whether the new deadline can even be met.

Too ambitious a target

The target of acquiring 80 million customers over 5 years does raise some questions:

  • 80 million acquired over a span of 5 years means the IPPB will have to add more than 1.33 million customers per month. Given the competition in the market, and that Payments Banks are not quite banks, that seems unlikely.
  • This massive acquisition target will as of now fall on only 650 branches. That is only if all of them start operations as per the April 2018 deadline.
  • Most critically the new RBI norms which require third-party KYC verification for payments banks will increase the cost of acquisition per customer. This has already caused concerns among private players like Airtel (who have themselves to blame). How does the IPPB plan to deal with this?

Realistically, India Post first target should be getting a portion of the 355 million strong savings bank user base to sign up for the payments bank within the next year. For that to happen India Post must show demonstrable advantages to using the payments bank (ease of use, better rates etc.)

ATMs for IPPB

“In line with the Cabinet’s decision, IPPB intends to rollout 5,000 ATMs over a period of time. At present, IPPB will leverage the DOP ATMs for its banking operations, which are already connected with network of ATMs of other banks,” Sinha said.

On last count, the India Post Payments Bank had issued 1619 Debit Cards: around 832 in Jharkhand and 787 in Chhatisgarh. While the Payments Bank hasn’t installed any ATMs, the Department of Posts has around 976 ATMs in rural India.

Edit: An earlier version of this article stated that there are 3.5 million savings accounts the India Post currently operates. This was incorrect, there are a total 355 million live accounts of all kinds in operation at India Post according to data provided to the Parliament.