New Era of Payments Banks- Opportunities and Challenges - Seeker's Thoughts

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Saturday, 1 September 2018

New Era of Payments Banks- Opportunities and Challenges

Introduction – Payments Banks- Payments bank is new model of banking that allows mobile firms, supermarkets chains and others to cater banking requirements of individuals and small business to further enhance financial inclusion.
 It comes under the category of differentiated bank. It includes acceptance of demand deposits, remittance services, internet banking other specifies services but cannot undertake lending services.
Payment banks can accept deposits maximum up to 1,00,000 per account from individuals and small businesses.
They can issue ATM/debit cards but not credit cards and can also issue other prepaid payment instruments. They also can distribute non-risk sharing financial products, mutual funds and Insurance products.
India Post Payments Bank
India's Post Payment Bank was set up on 17th august 2016 under Companies Act, 2013 as a public limited company with 100% government of India equity.   It comes under the Department of Posts in Ministry of Communication &Technology.
The intensions
It makes Department of Post’s network as a resource to reach to remote areas where quality financial services can be available at low-cost. It was the third entity to receive payments bank permits after Airtel and Paytm.
The Purpose – The purpose is to further increase the financial inclusion by providing basic banking remittance (money transfers from abroad) services and payments services to customers. It will facilitate access to financial services like insurance, pensions, mutual funds to customers especially from rural areas and the unbanked and under-banked areas.
It will help to encourage citizens to move forward towards cashless economy, and also it will create awareness about banking and payments technology by  generating new employment opportunities for skilled banking professionals.
The working- There will around 11 thousand Gramin Dak Sevak( ग्रामीण डाक सेवक) in rural area and postmen in urban area. These will provide doorstep banking services. IPPB also has been permissioned to link around 170 million postal savings banks (PSB) account with its account. It will also carry out various transactions that will enable IPPB customers to transfer and receive money from any bank account to any other bank account. 
Challenges- 
Challenges also remain into picture as it is difficult to predict that Payment Banks can earn profit and survive alone in business environment. 
Certain guidelines and regulations of RBI set boundaries for Payments Banks, which again remains a challenge. 
Not much effect was on market after Airtel and Paytm launched their payment banks. Indian Post Payment Bank offers 4% to its saving account customer, and to generate revenue it has to charge money on financial transactions and other services. 
Indian Post Payment Bank will also has to face competition as private entities are already in the market.

Conclusion 
However, in spite of all challenges, the new payment bank can work wonder in the financial inclusion across rural India.