PIB clears India Post's Rs800-cr payments bank proposal

The Public Investment Board (PIB) has approved a proposal by India Post for setting up a payments bank, but the Rs800-crore proposal is yet to get the union cabinet's nod.

With 25,000 post offices and 1.3 lakh rural branch offices across the country, India post, which is under the Department of Posts, is seen as the best candidate for setting up payments bank and facilitating financial inclusion.

"The PIB meeting was held on 19 January and the proposal has been approved. The recommendations of the PIB will now be placed before the cabinet for final approval," reports quoting sources at the Department of Post (DoP) said.

Payments banks are intended to give people easier access to the banking system, especially for the less privileged in the society.

India Post is reported to be in the process of selecting a consultant for setting up the payments bank. So far, three consultants are reported to have submitted their bids.

Payments bank's operations are limited to providing services such as "remittances and demand deposits," while they are also allowed to issue prepaid instruments such as debit cards (but not credit cards), as per Reserve bank guidelines.

These new generation banks, to be set up in semi-rural and rural areas, are expected to be fully functional by January 2017.

Besides India Post, as many as 40 international "financial conglomerates" such as Barclays and World Bank have shown interest in setting up payments banks.