Charges, restrictions may prove dear for India Post Payments Bank clients

Clients of IPPB have to pay even for depositing cash in their accounts
A long list of charges and restrictions could prove to be challenges for India Post Payments Bank (IPPB), launched on Saturday, in its objective of financial inclusion, say experts.

While IPPB offers 4 per cent quarterly interest — better than peers, which offer 3.5 per cent — it also has charges on transactions, withdrawals, and deposits. According to its 12-page document, reviewed by Business Standard, there are 80 different charges and restrictions for accounts with IPPB.

For getting cash delivered at one’s doorstep, one would have to pay Rs 25 per transaction; the goods and services tax (GST) would be extra. If one goes to a branch or an ATM, a customer can take out only a limited amount depending on the banking channel they are using as the India Post Payments Bank has set daily withdrawal limits. Apart from doorstep banking charges, the bank doesn't charge for any cash withdrawal transaction, India Post Payments Bank clarified to Business Standard on Wednesday.

Besides the charges, there would be other challenges as well.

For instance, clients might find it difficult to withdraw cash from rural post offices because these are managed by one or two people, who are unlikely to have a lot of money with them, said an official. What a client might need to do is register for a request for doorstep delivery of funds — a chargeable service. There is also a Rs 15 charge for every non-financial digital transaction.

IPPB is the largest payments bank in the country, leveraging India Posts’ 155,000 post offices and 300,000 employees.

Other banks, including payments banks, allow more services free of cost. For instance, HDFC Bank allows four free cash transactions, charging Rs 150 plus the GST for more. There is no limit on the amount. Paytm Payments Bank allows five free withdrawals with its ATM card, charging Rs 20 per transaction after that. 

IPPB is unable to offer ATM cards yet. As a result clients can’t use the united payments interface service. For the immediate payment service transfer, one would have to pay Rs 5 to Rs 50 depending on the amount. Besides Fino, other payments banks offer this service free.

Clients of IPPB have to pay even for depositing cash in their accounts. For doorstep collection, merchants have to pay Rs 25 plus the GST. Merchants with current accounts can deposit Rs 15,000 per day without any charge, but thereafter they will have to pay Rs 1.5 for every Rs 1,000, according to official schedule of charges provided by the India Post Payment Bank.

Other payment banks offer free deposits. There is also some concern about the financial viability of the payment bank, which prompted the government to slash interest rates just a few months before its launch. According to another set of documents reviewed by Business Standard, it was 5.5 per cent earlier. A senior IPPB official, who did not want to be named, said these charges and an interest rate cut were thought necessary while the financial viability of the bank was being assessed.

“Interest rate reduction happened two-three months ago,” he said. “Some of the charges and fees are included to ensure some revenue.” Asked why people who can get zero-balance accounts with debit cards from Jan-Dhan Yojana will open accounts with IPPB, he said India Post had the trust of the people. “Thanks to services it can provide, no one will mind the charges,” he added. Experts are sceptical about the viability of the model.

“If charges are this high customers will move away. Those without access to direct banking may be the core customers of the postal bank,” said Jindal Haria, associate director, financial institutions, India Ratings.  He added: “But, this strategy is not likely to succeed in the long term, since the payments bank business is a high-volume, low-value game. Charges hurt more at the lower end of the spectrum.”