As per RBI guidelines, payments banks can't accept fixed or recurring deposits. In case of savings accounts, customers can open a savings account with deposits of only up to ₹1 lakh
The India Post Payments Bank (IPPB) became operational on 1 September and has branches in 650 districts and 3,250 access points across the country, according to a government statement. By the end of the current year, all 155,000 post offices in the country are expected to be linked with the IPPB system.
But how is a payments bank different than our regular bank? Let’s take a look.
According to the Reserve Bank of India guidelines for licensing of payments banks, the main objective of a payments bank is to enhance financial inclusion. This is expected to be done by providing small savings accounts, payments and remittance services to migrant labour workforce, low income households, small businesses, other unorganised sector entities and other users.
In August 2015, RBI had given in-principle approval to 11 entities to start payments bank in India, which included the department of posts. Airtel Payments Bank was the first one to launch. At present, other payments banks like Paytm Payments Bank, Fino Payments Bank and Aditya Birla Payments Bank are also operational. IPPB had started operations at two pilot branches in January 2017.
A payments bank aims to further financial inclusion, especially through savings accounts and payments services. Accordingly, a payments bank is not allowed to give any form of loan or issue a credit card, which is also a form of unsecured personal loan.
Even in case of savings accounts, a payments bank has certain restrictions. Customers can open a savings account with deposits of only up to ₹ 1 lakh, which is also the maximum balance allowed. These banks currently offer interest rates similar to that being offered by regular banks. As per RBI guidelines, payments banks can’t accept fixed or recurring deposits.
IPPB will be offering 4% interest to its savings account customers. It is also offering doorstep services to its customers, under which opening an account will be free of cost, but other services like cash transactions are charged at ₹ 25 (plus GST) and non-cash transactions at ₹ 15 (plus GST).
Moreover, IPPB account holders will be issued a QR Card with a unique QR code. The transactions using the card will be authenticated using the account holder’s biometrics. While the card can be used for transactions like bill payments, cashless purchases and money transfer, it cannot be used to withdraw cash from an ATM. IPPB is not offering its customers an ATM or debit card at present.
Savings accounts customers also do not have the cheque book facility at present. Current account holders will have this facility, though.
IPPB account holders can also use the mobile banking app for checking balance, statement, bill payments and for online transfers.