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What are Payments Banks and why are they being seen as a significant step towards financial inclusion? Do you agree that the recently launched India Post Payments Bank is ideally positioned to take banking to the doorsteps in rural areas? Substantiate with arguments. 
(15 marks, 250 words) Answer:
In 201, RBI was asked to create framework for Differentiated banks to meet credit and remittance needs of small businesses, unorganized sector, low income households, farmers and migrant work force. RBI came up with guidelines for Payments Banks and Small Finance Banks.
Payments bank:
A payments bank is a differentiated bank with the specific objective of catering to the unbanked and underbanked. Non-banking financial organisations are granted the authority to offer basic bank services like accounts for small demand deposits (up to Rs 1 lakh), remittance services, mobile payments/transfers/purchases and other banking services like ATM/debit cards, net banking and third party fund transfers. They can offer non-risk sharing simple financial products like mutual fund units and insurance products, etc.
Aid in Financial Inclusion:
•        Financial Inclusion is critical for the socio-economic development of the country, but there are significant gaps in the banking services area and a large proportion of country’s population remain unbanked or underbanked.
•        Payments banks will have a “multiplier impact” on the banking system and financial inclusion, as they will provide doorstep banking to people in remote areas at lower cost and compete with traditional banks in future.
•        Payments banks will provide a limited range of products, but will have a widespread network of access points particularly to remote areas, either through their own branch network or through Business Correspondents (BCs) or through networks provided by others.
•        The operations of the bank should be fully networked and technology driven from the beginning.
India Post Payments Bank (IPPB):
•        Department of Posts was one of the applicants which were issued in-principle approval for setting up a payments bank. Through India Post Payments Bank (IPPB), the aim is to reach to every nook & corner of the country. 
•        With IPPB, banking at the doorstep can become a reality due to huge postal network in the country.
•        All the 1.55 lakh post offices in the country will be linked to the IPPB system by the end of 2018. It will facilitate financial inclusion in lakhs of villages. More than 3 lakh postmen and Gramin Dak Sevaks will be utilized to provide banking services.
•        The India Post Payments Bank (IPPB) was launched in 2018. It will have 650 branches and 3250 Access Points across the country.
IPPB will effectively leverage the ubiquitous post office network with its pan-India physical presence, long experience in cash handling and savings mobilization, backed by the ongoing project of IT-enablement, to bridge the gaps in Financial Inclusion and take banking to the doorstep in rural areas.


Banking is going to be more of technology-enabled and effort is now on to expand banking to every unbanked corners of the society and payments banks are perfectly suited for this. India Post Payments Bank with its wide network and experience is perfectly positioned to drive financial inclusion and should look to prioritise women SHGs in its operations.