India Post’s Payment Bank likely to start in January 2017

If all goes as per the plan, the India Post will roll out its Payment Bank operations in January 2017 – two months ahead of its schedule in March. “The process of setting up the payment bank is in progress. The department is expediting the basic formalities of licensing with the Reserve Bank of India (RBI). We hope that the Payment Bank operations start in January next year,” MS Ramanujan, Member (Banking & HRD), told Millennium Post.

“The department is also in talks with different financial establishments to streamline the payment bank proceedings in rural and urban areas. Since India Post is already in a tie-up with the Western Union for money transfer, primarily from abroad, the department is mulling to include global payment service provider for domestic payments,” Ramanujan said, adding that the department is upgrading its core banking system – a must for hassle-free financial transactions.

So far, 20,500 post-offices that have been upgraded to CBS (core banking system), and work is on at war-foot level to include maximum post-offices in the network. The department has 1,55,015 post-offices across the country, of which 1,39,144 are in rural areas. About 40 international financial conglomerates, including World Bank, Barclays and ICICI Bank, have shown interest to partner with the Postal Department for the payment bank.

According to RBI guidelines, the first branch of the payment bank has to be set up within 18 months. The bank will be able to bring out products such as demand deposits and remittances.  

They will not be allowed to undertake lending activities and initially be restricted to hold a maximum balance of Rs 1 lakh per customer. However, they will be allowed to issue prepaid payment instruments such as ATM and debit cards, but not credit cards.