India Post has launched pilot operations of its payments bank – India Post Payments Bank (IPPB) – in Raipur, Chhattisgarh and Ranchi, Jharkhand on Monday.

There are over 1,54,882 post offices across India, of which 1,39,182 (89.86%) are in rural areas, according to data by department of posts as on March 31, 2016. With the high coverage in rural areas, IPPB will effectively be able to tap on the targeted sectors.

India Post is also planning to open 650 new branches for the payments bank.

The Reserve Bank of India (RBI) had given in-principal licence to launch payments banks in August 2016. The government-operated postal network, India Post, is among the 11 entities that received the licence. Three companies out of 11, however, surrendered their licence. Those companies were Chalomandalam Distribution Services, Sun Pharmaceutical Industries Limited and Tech Mahindra.

The objective behind granting the licence was to financially include those with small saving accounts, low-income households, small businesses and unorganised sector.

Unlike other commercial banks, payments banks are not allowed to give credit or loans. These banks are, however, allowed to make arrangements with other commercial and small finance banks, having prior permission from the RBI. Those having a bank account in a payments bank can keep deposits up to Rs 1 lakh. Account holders in these banks get cheque books, debit card and interest on their deposits.

Airtel, India’s leading telecom service provider, was among the first licence holder to roll out its payments bank services for 29 states.

Paytm, a digital wallet company, announced the launch of its payments bank on January 15. At present, the company is converting its existing users into account holders.