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Current affairs is an important component of several competitive exams such as the UPSC Civil Services Examination, SSC CGL, Bank PO & PSU entrance tests, etc. Therefore, understanding the terms/concepts/events that make news is critical for aspirants. We at PaGaLGuY bring you series of articles explaining some of these important concepts/events. This article gives you details about RBI and the government’s decision to grant payment bank licence to sIndia Post.

The Reserve Bank of India is expected to grant payment bank
licence to the Department of Post (DoP) for the proposed Post Bank of India (PBI’s)
by September, Communications and IT Minister Ravi Shankar Prasad confirmed on
July 9.

Background

In February 2013, it was announced that DoP (also known as India
Post) was contemplating to start banking functions. While doubts were expressed
about DoP’s expertise,  in
December 2013, the department declared that it would install ATMs in 1000 of its offices
across India by the first half of 2014. In February this year the announcement was made
final.

What the move
signifies

·
The payment bank licence will enable the network
of 1,54,000 post offices (including 1,25,000 rural post offices) to offer
banking services to people across the country.

·
A few factors that worked in the post department’s
favour were that it changed its working style and achieved a turnover of Rs 500
crore in 5-6 months. Also, in the last one year, it has networked 27,215 post
offices into one national unit through computers.

·
The DoP has a hybrid model to operate the PBI’s.

·
DoP expects a revenue of over Rs.550 crore from
PBI in the first 5 years.

·
Prasad said that DoP has the potential to make
Digital India programme a success. Other programmes like Sukanya Samridhi
Yojana”, Postal Life Insurance, Jan Dhan Yojana, which were launched to
empower the rural and poor people will also be benefitted.

PBI’s banking
functions:

·
As per RBI guidelines, payment banks can offer a
limited range of products like demand deposits and remittances.

·
It will be allowed to issue ATM or debit cards
as also other prepaid payment instruments, but not credit cards.

·
PBI will have its own employees and IT
infrastructure. The transaction handled by DoP and its employees will be
entered into the PBI server.

·
PBI will not be allowed to undertake credit lending
and will initially be restricted to maintaining a maximum balance of Rs.1 lakh
per individual customer.

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