The Cabinet on Wednesday approved 80 per cent increase in spending for India Post Payments Bank (IPPB) to Rs 1,435 crore, three days ahead of its slated mega, nation-wide launch by Prime Minister Narendra Modi.
The government-backed IPPB is set to go live with 650 branches and 3,250 access points across the country on September 1.
It will offer financial services in rural areas including savings and current accounts, money transfer, direct benefit transfer, bill and utility payments and enterprise and merchant payments.
The increase will take IPPB project outlay to Rs 1,435 crore from Rs 800 crore -- giving it additional firepower to compete in the market with existing operators like Airtel Payments Bank and Paytm Payments Bank.
The revised cost estimate of Rs 635 crore is on account of Technology Costs (Rs 400 crore) and Human Resource expenses (Rs 235 crore), said an official release.
A mega-event has been lined up to mark the all-India launch of IPPB - while the PM will inaugurate the services of IPPB at Talkatora stadium in the capital, various Chief Ministers, Governors, Central and State Ministers, and other senior government functionaries will be present at the 650 branches that are slated to go live simultaneously (state capitals, major cities and towns).
IPPB that will ride on the expansive and "trusted" network of post offices and offer "doorstep banking" to the unbanked, creating one of the largest banking networks in the country, with significant rural presence.
"This will be the most accessible, affordable and trusted bank for the common man. It will aim at financial inclusion for unbanked and under-banked population," Communications Minister Manoj Sinha told reporters here.
Government owns 100 per cent in IPPB, which has been set up under the aegis of Department of Post, and will offer products and services though multiple channels such as counter services, micro ATMs, mobile banking app, messages and interactive voice response.
IPPB will leverage tech platforms, and offer 4 per cent interest rate on savings accounts. Payments banks can accept deposits of up to Rs 1 lakh per account from individuals and small businesses, but do not have the mandate for insurance and loans.
"However, we have made provision for this through third-party products. We have entered into an alliance with Punjab National Bank for Pradhan Mantri Jeevan Jyoti Bima Yojana...Also, in case of loans, IPPB will work as an agent of PNB. For life insurance, we have tied up with Bajaj Allianz Life Insurance," the minister said.
The payments bank hopes to be profitable in three years.
IPPB will begin scaling up its operations immediately from the 650 branches and 3,250 access points, Sinha said, adding that all 1.55 lakh post offices in the country will be linked to its system by December 31, 2018. Of these, 1.30 lakh access points will be located in rural areas, taking it to vast untapped market.
The IPPB's payments/financial offerings will be distributed by the Department of Posts (DoP) employees and last mile agents - over three lakh in all - transforming them from mail deliverer to agents of financial transformation, the Minister said.
The last mile agents, postal Staff and gramin Dak Sewaks, will be provided incentive/commission directly in their accounts for their services (estimated at about 25 per cent of profits), and another 5 per cent or so will be utilised for strengthening the infrastructure of post offices.
IPPB has permission to link around 17-crore postal savings bank (PSB) accounts with its own set up. "DoP and IPPB will work on a model and attempt to offer PSB account holders, the benefits of postal payments bank," Sinha said.
IPPB will leverage Aadhaar to open accounts, while QR card and biometrics will drive authentication, transactions, and payments. Gramin Dak Sevaks will be armed with smartphones and biometric device to handle transactions.
"We will be able to reduce the cost of opening account as the system will be Aadhaar driven," the Minister said.
The last mile agents will be fully trained - 18,000 people have got their training while those deputed as master trainers will prepare the rest.
"I believe that will not be competing with others (other players). In the rural areas, we will do more work than they do combined. We have already opened 4 lakh accounts for IPPB, and there are 17 crore PSB accounts which will be slowly linked with IPPB," Sinha added.