International Journal of Research in Advent Technology (IJRAT) Special Issue E-ISSN: 2321-9637 Available online at www.ijrat.org International Conference “ICFTWF-19”, February 4th & 5th 2019

A Study on Payments as a Tool to Drive Financial Inclusion in India

Reena. F, Ph.D., Dr. T. Joseph 1Research scholar, Loyola college, Chennai, ph-9952097350, [email protected] 2Research guide, Head department of Commerce, Loyola college, Chennai, ph-8939953996, mail-id- [email protected]

ABSTRACT:-Financial inclusion is an important tool to eliminate poverty, because poor, disadvantaged and under privileged group is struggling to access to fiancé and they are basically financially illiterate, including them into the banking system is the only way to direct them into the development path, hence government of India is taking various steps to avoid financial exclusion, the recent step taken by the government is to launch INDIA POST under the control of postal department in order to reach the people in the remote areas and offer them the at minimal cost who has previous life long experience in handing and providing financial services. The study attempts to understand the concept India post payments bank and the services offered by it to drive financial inclusion. KEYWORDS—Financial inclusion, IPPS, India Post Payments Bank, payments bank, doorstep banking

1. INTRODUCTION India to promote the extent of Financial Inclusion Easy access to sources of finance i.e., Financial in India. To achieve maximum financial Inclusion is believed to be an important tool to inclusion, and other financial institutions poverty alleviation and inclusive growth. Financial throughout the country scaled up their inclusion or inclusive financing is the delivery of initiatives to achieve their targets for Financial financial services, at affordable costs, to sections of Inclusion. And government is also investing our disadvantagedand low income segments of country‟s resources in various ways to reach the society. Access to finance by the poor, unbankable sections of our society. One such idea disadvantaged and underprivileged group is a is involving India‟s postal department as one of the prerequisite of poverty alleviation on one hand and driving forces of achieving financial inclusion. This the economic growth on the other. In the struggle study tries to understand the concept of payments against poverty, the financial inclusion is a crucial bank and how India Post Payments Bank is used as element. Large sections of the rural population a tool achieve financial inclusion. have no access to financial services andtheir only recourse is to borrow from moneylenders at the OBJECTIVES OF THE STUDY: exorbitant charges causing exploitation. The main  To understand the functions of INDIA reason why the large section of the rural population POSTPAYMENTS BANKS still remains under below poverty is financial  To analyse various services provided by exclusion, which is proving to be a major India post payments banks to drive obstacle in the path of India‟s economic growth. financial inclusion The Reserve (RBI)‟s dictate (2005)  To analyse how it is different from other obligated the Banks to adopt the national policy of payments bank financial inclusion and take initiatives and suitable  To find out the challenges Faced by India measures therefore. The objective data derived Post Payments Bank from the RBI‟s reports and other empirical studies unequivocally pinpoint that the main reasons of 2. RESEARCH METHODOLOGY: financial exclusion are lack of opportunities and The study is based on secondary data collected access to finance, financial illiteracy, besides from various websites, journals, articles, books etc., poor performance, apathy and negative LIMITATIONS OF THE STUDY: approaches of the Banks. Therefore, financial  The study is the based on the secondary inclusion, today, has become the national data only objective and major concern for the economic  IPPB has started its function only few policy decision makers. Following the months back hence official statistics is not recommendation of Khan Commission-2004, available to find the true picture of the various reformative measures have been taken IPPB by and Government of 3. REVIEW OF LITERATURE:

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International Journal of Research in Advent Technology (IJRAT) Special Issue E-ISSN: 2321-9637 Available online at www.ijrat.org International Conference “ICFTWF-19”, February 4th & 5th 2019

Vyas, Gaur & Singh (2016), discussed the Perspective from Tamil Nadu State, India, that evolution of payment banks. The study evaluates though over the past six years the FI strategy had the scope of payment banks in fulfilling the improved the life style of BPL, but missing focus objectives of financial inclusion. They also on savings and credit improvement strategies compare the Indian scenario with the success of M- degrades the benefits of FI. This paper surveys Pesa in Kenya. analyzes the issues pertaining to implementation of Krishnakumar (2015) analysed the existing financial inclusion in economically down trodden business operations of payment banks and proposed districts of Tamil Nadu, India. a theoretical model as an improvement over the existing model. They argue that the current telecom 4 INDIA POSTAL DEPARTMENT: boom along with innovation in technology can Indian postal department is playing an important assist in reform the banking sector and provide role in the country‟s socio economic development impetus for the cause of financial inclusion. over more than 150 years, it touches the life of Winn (2015) outlined the mobile payment Indian citizen in different ways by delivering mails, mechanisms in Kenya, Brazil and India. accepting deposits under Small Savings Schemes, Mas (2009)Few studies have analysed the concept providing life insurance cover under Postal Life of payment bank. In a landmark article he Insurance (PLI) and Rural Postal Life Insurance discussed the regulations for branchless banking (RPLI) and providing retail services like bill which includes payment banks in India. The study collection, sale of forms, etc. The postal department argued that the regulatory framework needs to also acts as an agent for Government of India in evolve to foster competition by a broad range of discharging other services for citizens such as players. It also stresses that the existing regulations Mahatma Gandhi National Rural Employment should be modified to reduce the cost of entry and Guarantee Scheme (MGNREGS) wage provide scope for business model innovations. disbursement and old age pension payments. With Rama Pal and Rupayan Pal (June 2012)analyzed 1, 55,015 Post Offices, the India postal department in their article Income Related Inequality in has the most widely distributed postal network in Financial Inclusion and Role of Banks : Evidence the world. on Financial Exclusion in India, income related Adding to it the government of India decided to inequality in financial inclusion in India using a reach the rural people and offer them the financial representative household level survey data, linked services by launching INDIA POST PAYMENTS to State level factors. This paper also provides BANK, which is basically started with the aims to estimates of the effects of various socio, economic provide access to efficient banking services to and demographic characteristics of households on every household in India by enabling them to propensity of a household to use formal financial become financially secure and empowered. services, and compare that for rural and urban India Post Payments Bank (IPPB) was setup under sectors. A notable result is that greater availability the Department of Posts, Ministry of of banking services fosters financial inclusion, Communication with 100% equity owned by particularly among the poor. Government of India. IPPB was launched as a pilot RoshnyUnnikrishnan et. al (2012),analyzed in project on 30 January 2017 in (Jharkhand) their study “Enabling Financial Inclusion at the and Raipur (Chhattisgarh). IPPB got launched by bottom of the Economic Pyramid”, the importance Prime Minister at Talkatora of financial inclusion in economic empowerment. Stadium in New Delhi on 1st September 2018. This study identified the variables in enabling IPPB will provide the banking services to urban financial inclusion, analyzed the barriers to and rural areas, but it‟s primary focus would be on effective financial inclusion and the prerogative rural segment. steps to be taken to overcome the barriers and IPPB has launched 650 head offices in each district enable inclusive growth. The study concluded by throughout India in the ratio of one branch in every identifying the variables that empower the masses district initially to offer the financial services to the financially and stating the importance of social rural poor and unbankable section of the society inclusion in relation to financial inclusion and also and it has changed 3,250 post offices in India as by reinforcing the importance of self-sustenance at banking access point. And it also employed more the bottom of the economic pyramid. than 15,000 postmen as Gramin dak sevak to HemavathyRamasubbian and provide doorstep banking services to the rural GanesanDuraiswamy (2012) suggested, in their India. And they are planning to link the 1.55 lakh article The Aid of Banking Sectors in Supporting post office and 3 lakh postal employees which is Financial Inclusion – An Implementation spread across India into IPPB.

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International Journal of Research in Advent Technology (IJRAT) Special Issue E-ISSN: 2321-9637 Available online at www.ijrat.org International Conference “ICFTWF-19”, February 4th & 5th 2019

5. PRODUCTS OFFERED:  Remittance &fund transfer- IMPS, NEFT , Regular : this is just like any RTGS and UPI services is also provided other banks savings account, it can be opened by  Direct benefit transfer – government anyone at the bank access point or at their door subsidies and other benefits can be step, interest at the rate of 4% per annum is transferred to the customer‟s account provided, unlimited cash withdrawals and deposits directly. are allowed. Zero balance can be maintained; Current Account: this merchant services can be maximum balance the account holder can have availed by small merchant, kirana stores and small under this account is Rs.1,00,000 above which will businessmen, merchant app, periodic statement, be transferred to the post office savings account unlimited digital payments and acceptance can be Digital Savings Account: this is a digital savings availed at free of cost. It encourages cashless and account which can be operated through IPPB‟s paperless transactions and helps the small scale mobile app any one above the age of 18 years with business men to march towards the digital India at card and pan card can open this digital ease. savings account. Salary account: this account is provided to all Basic Savings Account: it is similar to the regular kinds of salaried employees. savings account but only four cash withdrawal is Third party products: allowed.  Group term insurance: This product offers Features of savings account: insurance to the underprivileged at a  Convenient banking nominal cost and it can be availed easily  Quick and paperless account opening  SukanyaSamriddhi Account: This scheme  Interest rate of 4% p.a. is provided is launched to secure the future of the girl  There is no compulsion to maintain monthly child in the family of every household, this average balance is basically offered by India Post department  Minimum amount required to open the but the customers can avail the services savings account is Rs.20 through India Post Payments Bank  Account statement is provided every quarterly  Public Provident Fund: Public Provident at free of cost Fund is long term and popular scheme. It  Customer can get their mini statement through was introduced by the National Savings SMS Organisation in 1968 to help investors  QR card is provided to give simplified mobilise small savings. Investments under banking services to the customer the scheme have respectable returns, along  Instant fund transfers through IMPS with income tax benefits.  Bill payment and recharges can be done  Recurring Deposit Account: Delighting its through their payment bank app customers, IPPB introduces a feature  Customer can have the option of linking their allowing you to make payments to your payment bank savings account into the POSA recurring deposit account. The facility can (Post Office Savings Account) be availed through multiple channels like Services offered: Doorstep services, Mobile banking and Post  Mobile banking Offices counters.  SMS banking  Loan Against Recurring Deposit: A customer who has a Recurring Deposit  Missed call banking Account Post Office can easily avail loan  Phone banking against it. After completing one year of  QR code Recurring Deposit account, Customer can Door Step banking: this service can be used by withdraw up to 50% of the balance. These the customers to open account and they can also products of post office savings account can deposit or withdraw cash and avail all other be availed through India post payments services from their home itself at a nominal charges Bank savings account. ( Rs.25 for cash transaction and Rs.15 for digital IPPB AS A TOOL TO DRIVE FINANCIAL transaction) this enables the government to reach INCLUSION: the people even in the remote areas and provide the 1. It provides savings account to the under financial services required to them. privileged with zero balance, this enable Payment services: the poor people who are financially poor  Bill payments –customers can recharge to enter into the banking system. and pay other utility bills

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International Journal of Research in Advent Technology (IJRAT) Special Issue E-ISSN: 2321-9637 Available online at www.ijrat.org International Conference “ICFTWF-19”, February 4th & 5th 2019

2. IPPS is under India Post which has huge IPPB HOW IT DIFFERS FROM OTHER amount trust among the people through PAYMENTS BANK IN INDIA their postal networking and services so it 1. Unlike other payments this offers door is easy to create awareness among people step banking, this gives a personal touch about the need for financial inclusion and to the services provided by them the necessity to enter into the banking compared to the other banks. system. 2. They provided interest at the rate of 4% to 3. It provides door step banking by involving the savings account holders, whereas their postmen into the banking system as private payments banks don‟t give any Gramin dak sevak they provide services such interest to their customers apart from like account opening with zero charges, cash back offers. digital payment, cash withdrawal, cash 3. They also provide third party services like deposits etc., at the door step of the remittance, insurance, sukanya samridhi account holder with nominal charges this account, public provident fund, recurring is an innovative tool to reach the people deposits, loan against recurring deposits who are unreachable in the remote corners etc., at affordable cost to enable the poor of the country. people to be financial secure. 4. Involving postmen who have long time 4. The prime aim of India Post Payments is relationship with people in the locality to achieve financial inclusion whereas the where they work is a way forward to gain private payments bank work on profit the trust of the people on the banking motive concept. system and services. 5. It primarily focuses on unbanked and 5. Through IPPS financial illiteracy of the underbanked sections of the society people can be reduced and they can be whereas private payments bank focuses on enlightened about the various services, those areas where they can generate products and schemes offered by the revenues like metro cities. government and banks to a greater extent 6. It performs both the functions of a bank 6. IPPS will have a personal touch with the and payments bank. customers through there earlier CHALLENGES FACED BY IPPB: experiences with the banking services. 1. Huge amount of competition from the 7. There is no restriction in the number of other market players who are already well deposits and withdrawals into the account experienced and well equipped in the maximum up to 1,00,000, this will drive digital payments services. the people to adopt the habit of savings „ 2. IPPB can accept maximum amount of 8. It offers digital services like SMS banking, 1,00,000 per savings account upon which mobile banking, missed call banking, has to be transferred to the post office phone banking etc., the customers can get savings account their account balance through their mobile 3. Too much of dependence on the app itself, this will help the government to government hence independent decisions drive the into the digital platform of can‟t be made quickly. banking and paperless banking system can 4. They can accept deposits but can‟t lend be achieved. that money to the people. 9. It gives QR code not only to the current 5. As per RBI guidelines, payments bank has account holders, it is given to the other to invest there 75% of their deposits into types of account holders as well this helps RBI listed government and other securities the people to make payments at ease and investment platforms.And remaining without any hindrances. 25% can be invested in other forms of 10. It is fully funded by the government of investment. Hence there earning capacity India, hence all the government products, and profitability is restricted. schemes and services can be directly 6. Too much of dependence on technology delivered to the unbankable section of the will hinder in gaining the confidence off society. the unbankable section of the society 11. The customer can open bank accounts by because its difficult to change the attitude following simple procedures and norms of the people to a certain extent. with their AADHAR card.

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International Journal of Research in Advent Technology (IJRAT) Special Issue E-ISSN: 2321-9637 Available online at www.ijrat.org International Conference “ICFTWF-19”, February 4th & 5th 2019

7. There is always a chance of online fraud, government of India is one of the applauded step to phishing, identity data theft etc., hence safe drive financial inclusion. But the big challenge is and secure banking is always in question. how well this payment bank function effectively 8. Too much of amount to be invested in order to and efficiently in the long run. Future sustainability make innovative changes in the system of and stability of the payments in the present and banking future market conditions is the one which 9. There are no offers like discount, cashbacks, government has to concentrate on. And the coupons etc., is provided unlike their government should not depend upon these few competitors. steps to achieve financial inclusion they should 10. There are no sufficient linkages between the further come up with more innovative and effective postal networks. methods to drive financial inclusion. India Post 11. Only minimal no of ATMS and bank access payments bank can be used as one of the too to points have been set up as of now drive financial inclusion but we can‟t depend on it 12. Financially illiterate people have to be keep alone. on updated, equipped, with the innovations in REFERENCE: the banking technology and changes in the [1] https://www.ippbonline.com/ financial services. [2] https://www.indiapost.gov.in 13. It started its financial operations only from [3] https://www.rbi.org.in/ September 2018 hence it has a long way to go [4] https://www.thehindu.com/business/all- in order to become successful payment banks you-need-to-know-about-payment- in the country. banks/article7561353.ece SUGGESSTIONS: [5] https://www.elkjournals.com/microadmin/ 1. They have to link all their postal branches at a UploadFolder/2674CHANGING%20LAN rapid speed to manage the competitions in the DSCAPE%20OF%20BANKING%20SYS market. TEM%20IN%20INDIA%20PAYMENT% 2. They should keep their technology updated 20BANKS%20OPPORTUNITIES%20OR and inform the same to the customer often. %20CHALLENGES.pdf 3. They can link themselves with other big [6] Mas, Ignacio. (2009) "The Economics of banking networks, NBFC‟s and other Branchless Banking." Innovations: financial institutions in order to develop the Technology, Governance, Globalization payment banking network and reach the 4.2 : 57-75. people who live in remote corners without the [7] Merwin R. (2015). “To compete with knowledge of financial system, services and payments banks, existing players are unbankable. This will help the government to scaling up digital initiatives”. The Hindu achieve the target of financial inclusion Business effectively and efficiently. [8] Report of the Committee on Financial 4. They should come up with new and Inclusion in India (Chairman: C. innovative promotional offers and products Rangarajan) (2008), Government of India. like cash backs, discount, coupons etc., in [9] Report on Currency and Finance, order to meet the challenges in the market by "Financial Inclusion", Reserve Bank of their competitors like , Paisapay, India. Phonephe,jio money, and other [10] Reserve Bank of India, "Report on mobile wallet networks. financial Inclusion" 5. They can launch their own digital financial [11] Evolution of Payments Bank and Impact services. From M-PESA: A Case of Mobile 6. They should concentrate on customer Banking Services in India GouravVyas, grievances and should manage it efficiently Loveleen Gaur, Gurinder Singh Published and effectively. 2016 in ICTCS '16 DOI:10.1145/2905055.2905097 5. CONCLUSION: [12] Krishnakumar. (2015). Payment banks are becoming the most popular "Transforming banking through telecom- medium of digital transactions. India is going an approach." Indian Journal of Science towards a cashless economy, which is more and Technology 8: 1. feasible and adaptable in relation to the recent technological and economic trends. Launching India Post Payment Bank wholly funded by the

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