Payments banks to have multiplier impact on system: FM Arun Jaitley

 Payments banks will have a "multiplier impact" on the banking system and financial inclusion, as they will provide doorstep banking to people in remote areas at lower cost and compete with traditional banks in future, finance minister Arun Jaitley said. 

Launching pilot services of India Post Payments Bank (IPPB) at Raipur and Ranchi on Monday, Jaitley said IPPB will expand operations to 650 districts by September. India Post, which got the permit to launch banking operations on January 20, is only the third entity to have received central bank's approval to start operations, after Airtel Payments Bank and Paytm. 

"The pattern in which the payments bank is being formed, the overhead cost is very less because the existing structure is being used. Going forward, a time will come when for small depositors, this payments bank will give competition to normal banking," Jaitley said.

He said telecom companies have lakhs of stores which will start working as payments banks. Also with 1.55 lakh post office branches and the services of lakhs of postmen being converted into banking operations with the launch of India Post Payments Bank, the demand for a brick and mortar bank branches in far flung villages will get reduced. 

Payments banks can accept deposits of up to Rs 1lakh per account from individuals and small businesses. The new model of banking allows mobile firms, supermarket chains and others to cater to banking requirements of individuals and small businesses. The new banks will confine activities to acceptance of deposits, remittance services, Internet banking and other specified services.

Source:-The Economic Times