The Economics of the Post Office
India Post Payments Bank
How India Post Payments Bank uses postal workers to bring doorstep banking to villages, what a payments bank can and cannot do, and its results.
India Post Payments Bank (IPPB) launched nationwide in September 2018.
What a payments bank is
The RBI created payments banks in 2015:
- They can accept deposits up to a limit (raised to 2 lakh rupees per customer).
- They offer payments, transfers and bill payments.
- They cannot give loans or issue credit cards.
IPPB’s model
- Uses postmen and Gramin Dak Sevaks with smartphones and biometric devices.
- Offers doorstep banking: opening accounts, deposits and withdrawals at home.
- Aadhaar-enabled payments let customers withdraw from any bank account using fingerprints.
Scale
IPPB opened crores of accounts, with a large share held by women and rural customers.
Uses
- Welfare payments.
- Remittances from migrant family members.
- Bill payments.
Challenges
- Earning profits without lending is hard.
- Dormant accounts.
- Competition from UPI apps and banks.
The doorstep withdrawal
An elderly woman who can't travel to a bank uses her fingerprint on the postman's device to withdraw her pension at her doorstep.
Thinking payments banks can lend
Payments banks can take deposits and make payments but can't lend.
Key takeaways
- IPPB launched nationwide in September 2018.
- Payments banks can't give loans.
- Postal workers provide doorstep banking with biometric devices.
- Profitability and dormant accounts are challenges.
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