India Post gets go ahead for payments bank

The government on Wednesday gave India Post the go ahead to set up a payments bank with a corpus of Rs 800 crore.

The government on Wednesday gave India Post the go ahead to set up a payments bank with a corpus of Rs 800 crore.

There are 154,000 post offices, out of which 139,000 are in rural India.

Payments banks can collect deposits and offer different payment solutions to customers, but cannot lend.

This comes at a time when three private sector players have withdrawn their applications to set up payments banks.

“The Cabinet has cleared proposal of postal payments bank. We have 154,000 post offices out of which 139,000 are in rural India. 650 branches of postal payments bank will be established in the country and will be linked to rural post offices,” telecom minister Ravi Shankar Prasad said.

Of the total corpus of Rs 800 crore, Rs 400 crore will be equity and the remaining 50% grants from the Central government.

The payments bank, to be headed by a chief executive officer, will be professionally run, Prasad said, adding that there will be representation from various other government departments, including the departments of posts and expenditure.

“By September 2017, all 650 branches of postal payments bank will become operational. The plan was to do it in three years, but now we will be doing it in a year,” the minister said.

Prasad also said that all ‘grameen dak sevaks’ in rural post offices will be given handheld devices by March 2017. Postmen in the urban post offices will also be given iPads and smartphones to improve efficiency.

At present, 22,137 post offices have core-banking facility, which is significantly higher than the country’s largest lender State Bank of India, which has 1,666 branches with similar facility.

In March, Cholamandalam Investment and Finance shunned its plan to set up a payments bank, while last month a joint venture of Sun Pharmaceutical Industries promoter Dilip Shanghvi, IDFC Bank and Telenor Financial Services, and Tech Mahindra dropped out.

Responding to the second withdrawal, RBI deputy governor SS Mundra. last week, said, “We would certainly feel little aggrieved because lot of efforts from the part of RBI goes in processing these applications.” Mundra also hinted at possible penalty for opting out.

Vijay Shekhar Sharma, co-founder of One97 Communications, said on Monday that the Paytm Payment Bank, which will be owned 51% by him and 49% by One97, will be operational by November this year. The bank will have an initial corpus of Rs 400 crore.

Others, including Vodafone and FINO PayTech have also announced plans in the last few months. FINO PayTech, with partner ICICI Bank, to raise Rs 500 crore.