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7th Pay Commission Latest News –
27% increase expected as against 14.29% recommended by 7th CPC –
Increase in Minimum pay expected now is Rs. 20,000 in the place of Rs.
18000 recommended by 7th Pay Commission
In addition to revision of
minimum entry pay and multiplication factor, staff side has been
demanding revision of annual increment from 3% to 5%, and reconsider 7th
Pay Commission’s proposal to abolish various allowances
Recent developments regarding
implementation of 7th Pay Commission recommendations indicate that Govt
may consider some of the demands of Staff Side, JCM such as minimum pay
and multiplication factor etc., relating revision of Pay Central
7th Pay Commission has
recommended that minimum Basic Pay of Central Government Employees which
is Rs. 7000 presently to be increased to Rs. 18,000. This works out to
14.29 % increase when taking in to account the dearness allowance of
125% with effect from 1st January 2016.
As far as existing employees are
concerned 7th CPC has recommended that their present basic pay has to be
mulitiplied by 2.57, to arrive at new new basic pay as on 1st January
2016. This new basic pay is 14.22% more than the existing one.
Multiplication Factor as per 7th Pay Commission Report:
Existing Basic Pay (Pay in pay band + Grade Pay
Existing Basic Pay with DA
7CPC recommended Basic Pay
(Net increase = 14.22%)
Since the implementation of 6th
Pay Commission recommendations provided an increase of 30% to 40% in the
pay of Employees, pay hike of 14.22% proposed by 7th Pay Commission was
termed by Staff Side, JCM as very meagre and retrograde.
In this background, now it is
disclosed by reliable sources that Empowered Committee formed by the
Govt to process the 7CPC recommendations is considering the staff side’s
demand to revise the minimum pay to Rs. 26,000. Minister of State for
Finance has also promised to consider the demands of staff side for
revising the minimum and multiplication factor, favourably.
It is learnt that Govt may
persuade Staff Side to settle with the minimum pay of 20,000 and
multiplication factor of 2.86. This is 27% more than present pay. As a
result Net increase in Basic Pay will be 27%
In addition to revision of
minimum entry pay and multiplication factor, staff side has been
demanding for revision of annual increment from 3% to 5%.
A vast majority of the rural population (approximately 61%, as per RBI), is still not covered
by formal banking and are underbanked. An easily accessible payments
network and universal access to savings is fundamental to financial
inclusion. The country has had the experience of pre-paid
Payment Instruments with reasonable success in facilitating payments in
urban areas. Their customers, however, face several limitations and
difficulties arising out of their non-banking status. On the other hand,
entities like the Department of Posts (DoP) have a wide network
and experience of handling financial transactions, but do not have a
banking license. Therefore, to bridge this gap, new, low cost, lean,
modern technology based delivery models were needed to further
financial inclusion with the differentiated scope of activities as
laid out for payments bank.
3. What is the GOI’s outlook on the Payments Bank and DoP’s foray into banking?
In the Union Budget of 2014-15 speech, the Hon’ble Finance Minister made the following announcement:
“After making suitable changes to current framework, a structure will be put in place for continuous
authorization of universal banks in the private sector in the current financial year. RBI will create a
framework for licensing small banks
and other differentiated banks. Differentiated banks serving niche
interests, local area banks, payment banks etc. are contemplated to meet
credit and remittance needs of small businesses, unorganized sector,
low income households, farmers and migrant work force”.
forward the same outlook, in the Union Budget of 2015-16, the
Honourable Finance Minister made the following announcement:
“The Government is committed to increasing
access of the people to the formal financial system. In this context,
Government proposes to utilize the vast Postal network with nearly
1,54,000 points of presence spread across the villages of the country.
I hope that the Postal Department will make its proposed Payments Bank
venture successful so that it contributes further to the Pradhan Mantri
Jan Dhan Yojana.”
4. What is the scope and activities of the Payments Bank?
As per the RBI Guidelines, the payments bank will be set up as a differentiated bank
and shall be permitted to set up its own outlets such as branches,
Automated Teller Machines (ATMs), Business Correspondents (BCs), etc. to
undertake only certain restricted activities permitted to banks under
the Banking Regulation Act, 1949, as given below:
• Acceptance of demand deposits, i.e., current deposits, and savings bank deposits from
individuals, small businesses and other entities, as permitted. The payments bank will be
restricted to holding a maximum balance of Rs. 1,00,000 per individual customer.
• Issuance of ATM / Debit Cards. Payments banks, however, cannot issue credit cards.
• Payments and remittance services through various channels including branches, Automated
Teller Machines (ATMs), Business Correspondents (BCs) and mobile banking.
• Issuance of PPIs as per instructions issued from time to time under the PSS Act.
• Internet and mobile banking - The payments bank is expected to leverage technology to offer low
cost banking solutions.
• Functioning as Business Correspondent (BC) of another bank - a payments bank may choose to
become a BC of another bank, subject to the RBI guidelines on BCs.
• As a channel, the payments bank can accept remittances to be sent to or receive remittances
from multiple banks under a payment mechanism approved by RBI, such as RTGS / NEFT /
• Payments banks will be permitted to handle cross border remittance transactions in the nature of
personal payments or remittances on the current account.
• Payments banks can undertake other non-risk sharing simple financial services activities, not
requiring any commitment of their own funds, such as distribution of mutual fund units, insurance
products, pension products, etc. with the prior approval of the RBI and after complying with the
requirements of the sectoral regulator for such products.
• The payments bank may undertake utility bill payments etc. on behalf of its customers and
Please click on this link for further details: https://rbi.org.in/scripts/bs_viewcontent.aspx?Id=2900(RBI Guidelines)
5. Are there any restrictions on payments banks as compared to other commercial
Given that their primary role is to
provide payments and remittance services and demand deposit products to
small businesses and low-income households, payments bank will
initially be restricted to holding a maximum balance of Rs.. 1,00,000
per individual customer.
Payments banks cannot issue credit cards and cannot grant loan/ credit out of their own books.
The payments bank cannot set up subsidiaries to undertake non-banking financial services activities.
The other financial and non-financial services activities of the promoters, if any, should be kept distinctly
ring-fenced and not comingled with the banking and financial services business of the payments bank.
The payments bank will be required to use the words “Payments Bank” in its name in order to differentiate it from other banks.
6. Has this model of Post office setting up a bank worked anywhere else in the world?
Postal operators are the leading financial services providers in over 75% of the countries around the
world. Some of the Post Banks in the world have been hugely successful in the countries of their
operations e.g. Japan, New Zealand, Switzerland, France, China, South Korea, South Africa, Moroccoto name a few.
7. Why is DoP setting-up a payments bank?
DoP has been successfully running the Post Office Savings Bank for the Ministry of Finance. Setting up its independently owned bank is the next logical progression. Based on feasibility studies and a subsequent Detailed Project Report, the Department, in 2013, made an application to the RBI and a
proposal to the Public Investment
Board (PIB) to set up a universal bank. However, the Department was
advised by the PIB to set up a “differentiated bank” under the relevant
guidelines. Accordingly when the RBI came up with the guidelines for
licensing of Payments Banks in November 2014, the Department of Posts
made an application for the same and got the in-principle approval in
September 2015 for setting up its payments bank.
setting up of the payments bank is therefore necessary in view of
current market realities and to ensure continued relevance of DoP’s
products and services. Among other things, the decision to set up the
payments banks comes in the wake of changes in the payments and
remittances market space in the country and the declining share of the
Department in the market with the popularity of traditional money orders
and other such products going down with the customers.
The payments bank will ensure that the payments and remittance services offered through
the postal network are well aligned with the rest of the ecosystem
where the requisite money flows from one entity to the other through new
The payments bank will leverage DoPs wide reach, deep penetration, extensive network of branches
across the country, the deep connect with customers in rural areas and build upon it with modern day
technology and processes to provide quality services and work to increase the market share for the
DoP/IPPB combine. Through
partnerships with third parties it will offer a gamut of financial
services to further financial inclusion which is the basic objective of
setting up the payments bank. It will also aim to channel all types of
government to citizen payments and DBT through the payments bank and the
DoP network. Payments bank will also work to improve access to
financial services through technology based channels- PoS, mPoS, mobile
phones, ATMs, and internet etc. in addition to the physical access
points through the Post offices, delivery personnel, agents and others.
The payments bank will thus ensure that the postal network continues to
offer relevant financial services in sync with the market requirements.
8. How will setting up the payments bank benefit DoP?
payments bank will not only drive revenues for DoP but also help in
maintaining DOP’s brand image and relevance in the current financial
landscape that is evolving rapidly. The payments bank will open new
opportunities and increase DoPs market share. For example, today, DoPs
market share is only 0.3% of the Rs 6.2 Lakh crore utility bill payments
transactions. The utility bill payments services of the payments bank
as a Bharat Bill Payment Operating Unit (BBPOU) will help DoP in
increasing our market share in the utility bill payments space and
provide technology driven services to customers. The new age technology
will enhance customer experience, provide more options and help in
serving to the larger cause and vision of the GOI i.e. to bring about
financial inclusion for the vast unbanked and underserved population.
9. What will be the role and relationship of DoP with the proposed payments bank?
The payments bank will be a 100% subsidiary of the DoP and will have an independent board of
directors with representation from
the Department and other stakeholders from within the Government to
ensure strategic alignment with the overall objectives of the DoP and
the Government of India.
The post offices at different levels will be the main customer touch points for the bank’s services.
A close liaison between the bank and DoP staff at the access points
will be maintained on a regular basis at the branch level for success of
the delivery model
Role of the payments bank would be to:
• Design Products and Services
• Define Technology and Service delivery platforms • Train and handhold village Postal staff
• Marketing and third party tie-ups
• Define and monitor quality standards and customer grievances • Manage risk and compliance
• Undertake financial literacy of the target customer
Role of the DoP would be to:
• Act as customer interface for the bank
• Provide access points for the counter operations
• Door- step banking through delivery staff, franchisees, etcetera • Operational supervision and inspections
India Post Payment Bank (IPPB)
10. When will the India Post Payments Bank start operations?
per the RBI mandate, IPPB has to start operations by 6th March 2017,
i.e. within 18 months of having received the in-principle approval on
7th September 2015. To meet this deadline, the build out of the bank,
pre-licence approvals and technology audit has to be completed within
the stipulated date and the nationwide rollout can start thereafter. A
pilot launch is planned in the last quarter of FY 2016-17.
11. How many branches are likely to be opened?
Corresponding to the Divisional, Regional
and Circle Headquarters of the Department of Posts, about 450 branches
are proposed to be opened by December 2018 linking the post offices as
access points. The tentative roll out plan is as follows:
Payment Bank Branches200250
Linked Post Offices6000095000
12. Will all Post Offices provide services of IPPB?
Yes, after complete roll out all post offices will be access points for the services of IPPB.
13. What will be the USP for IPPB?
latest payments and banking technology, easy to use interface, the
trusted network of the post office and its dedicated staff with a local
connect will be the USP of the IPPB. IPPB will bring in innovative
services and interface for its target customer segments in all areas.
The accessibility and ease of use of services through a combination of
modern technology and the widespread DoP physical network, capable of
providing door step services will make it a unique payments bank.
Through a combination of physical and digital channels, the payments
bank will build the most accessible bank in the country especially in
rural and underserved areas of the country.
IPPB will play to its own strengths of traditional post office values. It will be driven by the
core objective of financial inclusion for the undeserved population to
make formal banking services accessible to them at the least cost
DoP’s role in IPPB:
14. How will IPPB function?
will be set up as a Public Limited Company under the Department of
Posts with an independent Board of Directors. It will be headed by a
Managing Director and CEO, and will set up a corporate head quarter and
up to 650 branches to manage its functions on a day to day basis. IPPB
will leverage the physical and IT infrastructure of the Post office and
be set up on a lean operating model. It will focus on low-cost,
low-risk, technology based solutions to extend access to formal banking.
Products and Services:
15. How will the products and services of IPPB be different from DoP’s payment and
DoP payments and remittances products are based on the basic money order services adapted for the
digital age. While IPPB will provide
the same benefits of payments and remittances to the customers, by
adopting newer, efficient processes and technologies such as mobile
based payments, digital wallets and innovative payment and remittance
products that are continuously emerging in the market today.
Combined with doorstep cash payment
options like traditional money orders, IPPB will differentiate itself
from the other players while comparing well with all other benefits
offered by competitors.
will drive the benefits of financial inclusion by bringing a host of
financial products to suit the needs of different strata of society with
special focus on the marginalized sections and citizens in rural areas.
In so doing it will also provide the following proposed services:
Direct Benefits transfer (DBT) of social security payments of
various Ministries, • Utility bill payments for electricity, water,
telephone, gas etc.,
• Facilitate payments of various Central and State Govt& Municipal dues, taxes and fees/taxes of
various Universities/ educational institution
• Person to person remittances both domestic and cross-border. Special focus will be on providing,
economical, safe and convenient money transfer facilities to migrant labourers, NRIs remitting
money to relatives, institutions etc.
• Demand Deposits (Current account and Savings Account)- with special focus on MSMEs, small
entrepreneurs, village panchayats & SHGs
• Distribution of third party financial products such as Insurance (health & general), mutual funds
and pension products
• Access to formal credit products by acting as BCs of banks & MFIs
Product innovation will be a continuous exercise to expand the bouquet of services adapting to the
evolving needs of its customers and the rapid advancements in communication and payments
16. Will there be an impact on POSB?
Apart from savings account with up to INR 1,00,000 in deposit, the products offered by IPPB are
different from POSB products. POSB savings accounts do not have any limit unlike payments bank
savings account. On the other hand payments banks can offer current accounts for use
by businesses and institutions whereas POSB does not offer these
accounts. Other kinds of deposits under POSB are unique to it and will
not be on offer by the payments bank. The purpose of the savings
accounts and current accounts of IPPB is to facilitate flow of money and
payments of different kinds from Government to Citizen, Citizen to
Government, Citizen to Citizen, Citizen to Businesses and Businesses to
Citizens whereas the POSB accounts are mainly savings instruments.
17. Can the savings accounts be shifted from POSB to IPPB?
The POSB accounts are operated by
the Department on behalf of the Ministry of Finance. The decision on
the future of POSB savings accounts lies with the Ministry of Finance.
The IPPB account will give various transactional advantages to DoP
customers apart from an additional option of earning interest depending
on their requirements.
18. Who will be the target customer of IPPB?
Apart from the existing customers of the DoP, IPPB will focus on the underbanked and unbanked
population in different parts of the
country. It will also try to target services for MSMEs, senior citizens,
students, migrant population, low income households, unorganized sector
and other groups with special service requirements. In addition to its
own products, the payments bank will partner with third parties to offer
a wide range of financial and banking services to cater to the needs of
its target segments.
19. How will the customer choose between the savings account of POSB and IPPB?
Given the difference in purpose of the
two accounts, the POSB customers can be encouraged to open a IPPB
account for managing their fund flow including bill payments,
remittances to other family members, businesses etc. depending on their
Customers focusing on savings may
prefer to leave their deposits with POSB and transfer some of the money
from these accounts to their IPPB account as per requirements.
However, the customers will have the
choice of the amount they want to leave in their IPPB account at any
point of time and they will earn interest on their money in these
accounts also. They would be able to channel money from their IPPB
accounts to any of the POSB schemes. For example, an IPPB customer will
be able to use money in his account to open and service a RD/ TD/ SSY or
any other POSB account. Thus both IPPB and POSB can synergistically
serve the customers.
POSB and IPPB will have different branding and the product features
will be quite different. At time of signing, customers will be clearly
told what the product features are. POSB and IPPB will actively declare
to customers, which product they are buying.
20. I would like to know more and contribute to the IPPB journey. How can I do that?
You could volunteer to be a trainer for IPPB and get specialized training for the same. You can also
suggest other ways in which you would like to contribute. You can send your questions and suggestions to email@example.com