India Post Payment BankGroup 3:

Mandeep Singh (211)Gagan Vij (223)Ishan Kalra (225)Ruchika Singhal (230)Anchal Aggarwal (201)

RBI Governor Raghuram Rajan has said that PBs will “revolutionize banking” in India, without posing a competitive threat to existing banks.

Application Process• Procedure for application:

– In terms of Rule 11 of the Banking Regulation (Companies) Rules, 1949, applications shall be submitted in the prescribed form (Form III) to the RBI

– In addition, the applicants should furnish the business plan and other requisite information as indicated. Applications will be accepted till the close of business as on January 16, 2015.

• Procedure for the RBI decisions: – The applications will be initially screened by the RBI to ensure prima facie eligibility of the applicants.

The RBI may apply additional criteria to determine the suitability of applications, in addition to the prescribed ‘fit and proper’ criteria

– Thereafter, an External Advisory Committee (EAC) comprising eminent professionals like bankers, chartered accountants, finance professionals, etc., will evaluate the applications.

– The EAC will reserve the right to call for more information as well as have discussions with any applicant/s and seek clarification on any issue as may be required by it. EAC may seek more information and call for discussions with the applicant.

– EAC will submit its recommendations to the RBI for consideration. The decision to issue an in-principle approval for setting up of a bank will be taken by the RBI. The RBI’s decision in this regard will be final

– The validity of the in-principle approval issued by the RBI will be 18 months, within which bank will have to be set up

Two India

How will they work

Account will be opened on the basis of unique mobile no.

Customer can make a transaction or remittance through web based mobile application or through IVR/USSD gateway to registered merchant or user. PB user can withdraw cash or top-up their accounts from points (Vendor, ATM, Agent) recognized by their payment bank service provider.

Current Challenges

• India’s cash addiction - Amazon, offers cash-on-delivery

• Issue ATM/debit cards – but not credit cards.• Low-cost domestic remittance alternatives.• Large upfront investment and long road to profitability• Figuring out partnerships with banks on credit-

issuance• Payments Banks present an exciting opportunity for

digital financial inclusion in India

Future Down the line

Reasons for withdrawal from payment banks

• Payments banks may find it tough to become profitable in the initial stages

• Entities do not have the liberty to lend. • Payments services to low-margin entities.• Payments bank have to primarily survive on fee-income

since 75 percent of their deposits have to be mandatorily invested in government bonds with maturity up to a year.

• Payments banks can only accept deposits up to Rs 1 lakh.

Tech Mahindra

Dilip Shanghvi-IDFC Bank-Telenor JV

Cholamandalam Investment and Finance Co. 1 2

3

Should IPPB withdraw from payment banks or stick around ?

• The plan is for IPPB to start operations by March 2017• IPPB probably has the best shot at success in the payments

banking space• Plans to open 650 IPPB branches by September 2017• The payment bank branches will be separate from India Post

and will be staffed by a separate set of employees• Expects support of more than 250,000 Grameen Dak Sewaks• India Post looks to appoint board for payments bank in 1-2

months as on Jun 30• IPPB expects to break even by year seven of its operations.

Why everyone wants a piece of India Post’s payments bank

• 50 companies including Barclays Bank, Citibank and many state-owned banks have sent proposals for a partnership with India Post’s payments bank

• IPPB has network of more than 150,000 branches, of which almost 140,000 are in India’s rural hinterland.

• IPPB will be a game changer for rural and suburban India. • The payments bank will begin with Rs.400 crore equity capital

and Rs.400 crore as grant from the government. IPPB plans to set up 5,000 automated teller machines.

Source : Livemint on Sun: Jun 12 2016

N.C. Saxena, former secretary of the erstwhile Planning Commission, said “financial institutions are sensing the potential that IPPB has in terms of its connectivity and reach.”