India Post Payments Bank readies for competition

Making it clear India Post Payments Bank is here to take on competition but not at the cost of customers, IPPB chief executive A P Singh said the entity would broaden the market not skim it. The officer was speaking at the launch of the payments bank.

Reacting to Airtel Payments Bank, which started a few weeks ago, offering 7.25 per cent interest on deposits, Singh said while the offer comes with “conditions apply”, there is no such thing with IPPB. 

The government-run IPPB, which rolled out pilot services in Ranchi and Raipur districts on Monday, will offer 4.5 per cent interest on deposits of up to Rs 25,000, five per cent on Rs 25,000-50,000, and 5.5 per cent on Rs 50,000-1,00,000. 

“If you have seen (Airtel Payments Bank offer), there is an asterisk above that, which typically means conditions apply. Our endeavour is that we will also have an asterisk which will say no conditions apply. This (Airtel’s) is ultimately a promotional offer. The economics of it is very clear. We can only put money in government treasury bonds, which currently are giving about 6.7 per cent pre-tax. After tax, it comes down to about five per cent,” Singh said.

IPPB will spend Rs 800 crore on building a pan-India network. “Of this, Rs 200 crore is the paid capital of the company. The government has so far released Rs 275 crore, most of which is still with us,” Singh said. 

While Airtel would be levying 0.65 per cent transaction charges on withdrawal above Rs 4,000, IPPB would not be charging anything. It has roped in Punjab National Bank for banking services, and is open to bringing in more players.

He added that public money is building IPPB. “I think governments do not compete with the corporate. They can skim the market, we will nurture it from below. I think primarily our role is to deepen and broaden the market. We are not here to skim the market.”

The bank aims to have 650 branches which roughly comes out to be one in each district, to be operational by September 2017. Each of these branch will connect to the post offices in there district.

Also, going by RBI directives, about 1,000 India Post ATMs will be transferred to the payments bank by the end of the current financial year. “We plan to do something innovative with these ATMs, they will be dispensing more that just cash,” Singh added. IPPB is giving a debit card with the card which can be used at these ATMs. It plans to increase the number of these ATMs.

According to Singh, around one lakh customers would be added by September from the eight branches which have gone live. “Our number game will be different. 

We designed Aadhaar as a payment address of an individual. We tested it as a ready instrument where with or without account you should be able to receive money into it. Fortunately or Unfortunately not many banks have implemented it. We will do something like that if you have a Aadhaar number you can get money whether its linked to a bank account or not,” he said.

Of the 11 applicants were granted in-principle licence for payments bank in august 2015, three dropped out. Paytm is planning to launch its bank in February from Noida in Uttar Pradesh.