Launched in September 2018, the Indian Post Payments Bank (IPPB) is one of the 11 entities granted payments bank license by the Reserve Bank of India. What does this mean for the common man? Is it yet another bank offering financial products like savings accounts? Or is there more to it? Let us learn more about Payment Banks.
- What is a Payments Bank?
As per RBI’s licensing guidelines, payments banks are a special category of banks, promoted to aid financial inclusion. Such banks provide basic facilities like savings account and payments and remittances services for small businesses, low-income families, migrant workforce, other unorganized sectors, and their end-users. It offers secured technology-driven services like mobile payments, online transfers, and other essential services like ATM cards, debit cards, net banking, and third-party fund transfers.
- How is a Payments Bank different?
While payments banks facilitate payments and remittances, they do not lend or issue credit cards. They do not accept fixed deposits or recurring deposit either. However, they are permitted to accept deposits only up to Rs. 1 lakh. In other words, they do not carry a risk of default.
Should you open a New Savings Account with a Payment Bank?
While it might sound that your existing account offers you all the services that a payments bank account would, we believe it might be a good idea to open a new savings account. Here is why:
1. A Backup Account: Most individuals not using facilities like Internet Banking or Phone Banking attribute it to issues like lost passwords account being locked, etc. At times, technical issues or downtime at your bank’s end also make it difficult to operate your main account. That is why having a backup account is a smart move.
2. Contingency Account: A new savings account be a ‘contingency account’. Itcan be used to keep money aside for emergencies. As far as possible, this money should be left untouched. With a significant backup fund by your side, you can weather most storms.
3. Benefit from Perks: As various payments banks compete to get your attention, you can gain by availing multiple offers, discounts, and cash backs. You also stand to gain from competitive savings bank interest rates offered by the different payments banks.
4. Investment Account: When you put all your savings into a single account, it can be difficult to identify which goal are you working toward. If you create a special ‘investments only’ savings account, you can keep a better track of your money, resist the urge to overspend and be able to identify and invest the amount you need to save for every goal.
If used smartly, a payments bank account can bring multiple benefits. For example, it can be used to start long-term investments in mutual funds.
IDFC Mutual Fund offers a range of hybrid, equity and debt funds for investors to choose from based on their risk appetite, financial goals and investment horizon. You can get started on the journey to wealth creation by setting up an SIP from any savings account. Visit www.idfcmf.com for more details.
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