Rural Banking- Indian Postal Services
Tags: Indian Economy, Microeconomics, Financial Inclusion, Banking, Post Office

In a diverse country like ours, financial inclusion is an indispensable part of the development process. Since, Independence many attempts were made to establish and revive the rural banking system but still it hasn’t reached to the poorest of poor. The need to bring the untouched potential into financial web of the country is inevitable.

Prime minister of India launched Indian Postal Payment service with the aim to provide payment service to doorstep in rural and semi urban areas. With more than 50% of Indian population residing and pursuing financial transactions in these areas, announcement of this service is a welcome step. With it’s widespread presence and large network of more than 3 lakhs postmen, Indian Post office will make banking service available to people’s doorstep.

Postmen will enhance the penetration of this initiative

About Indian Postal Payment Service

Indian Post Payment is a public limited company under post office department. With Government of India having 100% equity support, it works through its large network and strong workforce. With a tagline of “Apka Bank Apke Dwar” , Indian Postal Payment Banks envisages to cater to the need of Indian citizens but with IPPB the target customer is more or less includes the low-income households, beneficiaries from social sector, unorganized sector, small & marginalized sector, migrants, MSMEs, banked & unbanked segments in Urban and Rural habitats.It will offer a mix of both digital & physical platforms.

With it’s convenient and affordable digital solutions, IPPB seeks to leverage the trust that the public has on India Post. At present, Indian banks have around 50,000 rural India. Given the fact that the Department of Post alone has almost 1,30,000 service points in rural India which if converted into points of banking service, can provide a strong force to IPPB banking services in rural India at least by 3.5 times.

By converting the uncovered rural habitants and their financial holdings into its savings fund, IPPB can increase the rural per capita income through domestic savings and will allow rural people to live a respectable life that will have a sense of social security imbibed in it.

With the increase in revenue, decreases the load of ‘Non-performing assets’ that will ease off the pressure from the overburdened banking system of India from the tedious task of recovery of credit.

Apna bank, aapke dwaar

Challenges before IPPB

Coupled together with the vast demography of India and an already over burdened Indian Post Office both in terms of finances and work load(efficiency), IPPB has to take up the mammoth responsibility of delivering to the rural strata. This has to be performed in a time bound manner. This task become an uphill one, under the ambit of RBI’s notice that “ all payments banks are required to invest 75% of their total demand deposits in government-linked securities and treasury bills”.

India’s rural system is facing a big challenge in terms of infrastructure. L ack of tech-infrastructure in the country’s remotest rural areas coupled together with infrastructure deficit, IPPB aims to make Post man a mobile bank but it poses a greater challenge in areas with no power and internet connectivity.

Because of low level of financial literacy among rural masses, they might be discouraged to opt for formal services. Also, given the fact that IPPB will charge service fees on money transfer and other financial services, it raise serious questions on the how influx of rural population to avail services under IPPB will attain the threshold.

IPPB will include following medium for delivery of it’s services :

Counter operations.

Regular Account — Safal, Basic Savings Bank Deposit Account (BSBDA) — Sugam and BSBDA Small — Saral

“ I n order to make IPPB a goal oriented performing instrument of financial inclusion, it has to reach out to every possible household of the rural India. Department of Post has to develop a workforce by To over come the challenge of inadequate digital infrastructure especially internet connectivity in remote areas SIM cards, Micro ATMs and other instruments of mobile digital connectivity should be issued. Various service provider shall be contacted and a financially feasible plan should be devised. In order to sustain in competition it should organize workshops & interactive sessions with the rural masses emphasizing on the importance of autonomy in funds management, and promoting use of cashless transactions.” training and skilling the postal employees through a well planned training module for its field staff.