Indian Postal Payment Bank

A Payments Bank is a “differentiated bank” set-up by the Reserve Bank of India (RBI) to further financial inclusion for the underserved population by providing (i) current and savings accounts and (ii) payments or remittance services to migrant labour workforce, low income households, small businesses, unorganized sector entities and other users.

Services provided:

  • IPPB will offer demand deposits such as savings and current accounts up to a balance of Rs 1 Lac, digitally enabled payments and remittance services of all kinds between entities and individuals.
  • Provide access to third-party financial services such as insurance, mutual funds, pension, credit products, forex, and more, in partnership with insurance companies, mutual fund houses, pension providers, banks, international money transfer organizations, etc.
  • Issuance of ATM / Debit Cards. Payments banks, however, cannot issue credit cards
  • Payments banks will be permitted to handle cross border remittance transactions in the nature of personal payments or remittances on the current account.

Beneficiaries can access income from government’s DBT programs like MNREGA wages, Social Security Pensions and scholarships, directly from their IPPB bank account with near zero friction. They can also pay their utility bills, fees for educational institutions and much more from the same IPPB account. It ensures that wherever they are, they can make the most of the financial opportunities available to them.

All 1.55 lacs post offices including the 1.39 lac of the rural post offices will be mapped to the IPPB branch at the district headquarter and function as access points for IPPB. IPPB will usher in state of the art internet and mobile banking platforms, digital wallets and use innovative and emerging technologies to catalyse the shift from a cash dominant to a less cash economy.

About IPPB

IPPB has been set up as a Public Limited Company under the Department of Posts with an independent Board of Directors. It will be headed by a Managing Director and CEO, and will set up a corporate head quarter and approx. 650 branches to manage its functions on a day to day basis. IPPB will leverage the physical and IT infrastructure of the Post office and be set up on a lean operating model. It will focus on low-cost, low-risk, technology led solutions to extend access to formal banking.

Example of Postal banks in other nations

Postal operators are the leading financial services providers in over 75% of the countries around the world. Some of the Post Banks in the world have been highly successful, i.e. Japan, New Zealand, Switzerland, France, China, South Korea, South Africa, Morocco.

Practice questions:

Which of the following restrictions has been placed on payments banks as compared to other commercial banks?
     1. Payments banks cannot issue credit cards and cannot grant loan/ credit out of their own books of                  accounts.
     2. The payments bank will be restricted to holding a maximum balance of Rs. 1,00,000 per                             individual customer.
     3. Under Cash reserve ratio Payments Bank will be required to invest minimum 75 per cent of its                      demand deposit balances in Government securities/treasury bills.


    a)  1 and 3

    b)  Only 2

   c)  1 and 2

   d)  All

Ans: d

Exp: Given that their primary role is to provide payments and remittance services and demand deposit products to small businesses and low-income households, payments bank will initially be restricted to holding a maximum balance of Rs. 1,00,000 per individual customer. Payments banks cannot issue credit cards and cannot grant loan/ credit out of their own books of accounts. Apart from amounts maintained as Cash reserve ratio (CRR) with RBI, Payments Bank will be required to invest minimum 75 percent of its demand deposit balances in Government securities/treasury bills with maturity up to one year and hold maximum 25 percent in current and fixed deposits with other scheduled commercial banks for operational purposes and liquidity management. The payments bank cannot set up subsidiaries to undertake non-banking financial services activities. The other financial and non-financial services activities of the promoters, if any, should be kept distinctly ring-fenced and not comingled with the banking and financial services business of the payments bank. The payments bank will be required to use the words “Payments Bank” in its name in order to differentiate it from other banks.

IPPB which aims to promote financial inclusion and to enable quick payment services using the new technologies has been recommended by which of the following committee?

    a)  Nachiket Mor committee

    b)  Bimal Jalan Committee

    c)  Kelkar Committee

    d)  Yash Pal Committee

Ans: a