Multiplier Effect on Payment Banks is a possibility, says Arun Jaitley

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Arun Jaitley says that PAYMENT BANKS will have a multiplier effect especially with the newly launched programme. source: scoop whoop.com

Arun Jaitley said that it is possible for the payments bank ecosystem to go through a multiplier effect. As from now payments bank will give competition to the normal banking institutions in small depositions Usually when there is  new demand injected in the economy it goes through a multiplier effect. The pilot programme of India Post Payments Bank (IPPB) was launched on Monday and Jaitley said that this will let the IPPBs play a more important role in the banking system of the country even though it will deal only with small deposits.

The IPPB is the third entity that was allowed by the Reserve Bank of India to carry out banking operations after Airtel Payments Bank and Paytm on January 20th. In 2015,  11 entities were given permission to carry out the banking operations, but three dropped out of it reasoning with poor sustainable business model. The main highlight to the depositors is the high interest rate offered with each deposit. The overhead cost will also be less under the existing banking structure. Airtel Payments give an interest of 7.25 per cent to the depositors.

The new project that has just been launched plans to have a total of 650 branches with atlas one branch in each district and make about 3 lakh postmen active in the banking function. Two branches have already been launched by IPPB in Raipur and Ranchi. The rate of interests offered under each deposit scheme is as follows,4.5 per cent on deposits up to Rs 25,000, 5 per cent on deposits between Rs 25,000 and Rs 50,000 and 5.5 per cent on deposits between Rs 50,000 and Rs 1 lakh. The Finance Minister said that government had received requests to open banks in village areas that are corner banks. More than 1.55 lakh postmen will be shifted from their current service to banking operation services with the launch of the IPPB programme. A total of 800 crore rupees equity has been estimated for this purpose and the government has already put in 270 crores.