The biggest reason in favour of India Post Payments Bank is that it will save nearly three lakh postmen and over 155,000 branches from redundancy. With the demand for postal services falling shortly following technological advances and the near-universal availability of cell phones and internet services, there was little work left for postmen. Private courier services providing efficient services at reasonable costs had further cut sharply into the business of post offices. Since neither the post offices could be shut down nor its employees retrenched, the best option was to utilize their services for an equally important work. Ensuring financial inclusion of virtually the entire population is a laudable cause, given that the scheduled banks are urban and suburban-centric and do not reach the remote corners of the country.
The India Post Payments Bank launched by the Prime Minister last week will provide myriad financial services at a fraction of the cost charged by the major banks. It will accept deposits up to Rs one lakh but will not be allowed to lend like regular commercial banks. However, it will cover its costs by charging a modest sum for various services such as savings, remittances and payments through its nation-wide network of branches. A cap of four-percent interest on deposits is lower than what the banks provide but then the postal bank is expected to be used by the unbanked masses or those who have no access to a bank in their vicinity. One thing in favour of the postal bank is the provision for deposits above Rs one lakh to be turned into post office savings account. Nearly seventeen crore existing post office savings accounts will have the facility of being linked to the proposed payments accounts, facilitating an easier transfer of funds, interest, remittances, etc. However, the financial viability of the postal bank remains in doubt. Commercial scheduled banks make money by lending to customers at cost-plus interest rates. The postal bank is prohibited from lending money. It can deposit money in designated government securities which do not yield the same income deposits invested by scheduled banks earn through commercial lending.
The payments banks in the private sector which are already in operation have not seen much success so far. Both Airtel and Paytm are struggling to break even. The postal bank saddled with huge infrastructure of old buildings in almost every corner of the country and three-lakh employees who are now being trained as banking correspondents will have a problem covering costs of its operations, but still it is better than doing nothing. The RBI has imposed strict restrictions on postal banks which it is hoped would be relaxed in the light of the experience of these consumer-friendly experiments.
