India Post
India Post plans to set up 650 payments bank by September 2017. Pictured: An India Post mail truck in Mumbai [Representational Image]

The Public Investment Board (PIB) approved a Rs 800-crore proposal by India Post to setting up payments banks, but it is yet to get the Union Cabinet's nod.

Payments banks are typically created to bring about financial inclusion, which makes it easy for anyone to obtain a bank account. The postal department is currently in the process of selecting a consultant for setting up the payments bank, and so far, three consultants have submitted their bids, Press Trust of India reported.

"The PIB meeting was held on Jan. 19 and the proposal has been approved. The recommendations of the PIB will now be placed before the cabinet for final approval," a senior Department of Post (DoP) official was quoted as saying by PTI.

As per the Reserve Bank of India guidelines, a payments bank can only offer only limited services such as "remittances and demand deposits," and can issue prepaid instruments such as debit cards but not credit cards, PTI added.

Full-fledged operations of payments bank may start from January 2017. Payments banks are expected to be set up in semi-rural and rural areas. According to reports, as many as 40 international "financial conglomerates" such as Barclays and World Bank have shown interest in setting up payments banks.

There are 25,000 post offices and 1.3 lakh rural branch officers under the DoP across the in India currently.

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