NEW DELHI: With the recently rolled out payments bank of the Indian postal department aimed at taking banking to the doorsteps of people living in rural areas, the Centre claims to usher in a new era in the banking system and touch areas where traditional banks hesitate to go.
However, as average earning Indians in general have a multitude of banking options to choose from, why should one consider opening an account with the newest player in the system? A thorough look at the advantages and limitations of the India Post Payments Bank (IPPB) can perhaps give one some clarity.
Two of the biggest advantages of opening an account with IPPB are zero balance account and its widespread physical presence. While most of the public sector banks limit the zero account balance options to the basic savings bank deposit accounts that they are mandated to offer to the underprivileged, IPPB holders will not have to keep a minimum balance account to avoid a hefty penalty charged by traditional banks. Moreover, many of the services, if not all, offered by IPPB are free of cost unlike premium banks whereas you have to maintain a minimum monthly balance of around Rs 5000 to avoid penalties.
The huge distribution network of IPPB, apart from an option of availing the services at doorsteps, might also convince many people to open an account. At present, there are many parts in the country where one can easily spot a Post Office but not a bank. The paperwork required to open an account has been kept minimum.
Along with a zero balance account, IPPB will be offering 4 per cent interest to its savings account customers. To attract young smartphone users, the postal department is also mobile banking solution to wherein account holders can transfer money, pay bills, get statements and so on.
Another key feature if the IPPB is that it comes with QR Card with a unique QR code — which the government claims to be safer than ATM cards. The transactions using the card will be authenticated using the account holder's biometrics and not via four digit pin codes.
However, the service offered by IPPB has its own limitations that may prevent people to open an account. The biggest drawback with the IPPB and the payment banks in general is that they not allowed to offer loans. So, for people who are looking for a full-fledged banking service from IPPB, this might come as a big setback.
Restricting the deposit amount to Rs 1 lakh for savings account holders and RBI guidelines forbidding payments banks to accept fixed or recurring deposits might not be liked by many salary class people and small businessmen. A large section of people, for the convenience, would like to have a single account and the freedom to withdraw significant amount of money at will.
Also, at present IPPB does not offer ATM cards which are the most popular mode of withdrawing cash in urban and semi-urban centres.
The services offered by IPPB are cheap but they are not for free. For example the charges for NEFT are up to Rs 25, Rs 50 for RTGS and for IMPS it is up to Rs 50. IPPB would also be charging money for cheque book issuance, cheque bounce, additional physical statement and for other services. Though charging money for these services is vital for IPPB's survival, other players who have huge financial backings can provide people with these services at a lower cost, if not for free.