Several naysayers are questioning turning postal services into a payments bank and whether it will actually succeed. Interestingly, postal administrators are the main financial services providers in more than 75% of the nations around the globe. Japan, New Zealand, Switzerland, France, China, South Korea, South Africa, Morocco etc have seen immensely successful postal banks. A postal bank can be a great asset in a country where large chunks of the rural population (around 61%, according to the RBI), are either still unbanked or underbanked.
The DoP has been successfully running the Post Office Savings Bank for the Ministry of Finance. It also has the infrastructure and the know how to handle large number of cash transactions as it has been doing through the ‘money order’ services. Setting up an independently owned bank was the natural logical next step. With the payments and remittances space getting redefined in the recent past, the department had lost a signififcant share of its bread and butter money order business. Hopefully, the payments banks will ensure continued relevance of the DoP’s products and services.
The IPPB (Indian Post Payment Bank) will be 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 up to 650 branches to manage its functions on a day to day basis. The IPPB will take advantage of the physical and IT foundation of the post offices and be set up on a lean workforce model. It will concentrate on minimal effort, generally risk-free, innovation based answers to extending access to formal banking for the population in the country’s hinterlands.