PRESS NEWS:
A task force set up by Prime Minister Narendra Modi
to review the operations of India’s postal department has mooted the creation
of a full-fledged Postal bank.
The panel is headed
by former cabinet secretary, TSR Subramanian and comprising of experts that
includes former Infosys board member TV Mohandas Pai,
The recommendations
will be submitted to the government soon, according to a government official in
the know of the development. In fact, the task force has recommended to launch
the proposed Post bank through an Act of the Parliament and not by approaching
the Reserve Bank of India (RBI).
“The task force has
is not in favour of permitting India Post to run a payments bank but wants the
department to run a full-fledged commercial bank, which it believe will help
push the cause of financial inclusion in the country,” the official said.
An announcement in
this regard is likely to be made as early as Thursday at Dak Bhavan, the
headquarters of department of postal services in Delhi, the official said.
The task force, set
up in August, has also made several other recommendations to leverage the vast
network of India Post and its local knowledge across regions in India, the
official said.
For India Post,
which has been cherishing the dream of becoming a bank, the Subramanian panel
recommendation will be a huge boost for its demand for a full service
banking permit.
The Postal
department, which was among the 25 contenders for a full service banking
licence last year, didn’t get into the final list since the UPA government at
the time wasn’t keen on backing the move and refused to provide the
department with the minimum capital required to set up a commercial bank.
Last year, while
issuing licenses to IDFC and Bandhan, the RBI had observed that India Post can
be given banking licence if government, technically the promoter of the
proposed Post bank, gives its nod.
India Post has
argued that the department’s entry to banking can contribute massively to the
cause of financial inclusion, or the process of spreading banking services to
the unbanked population of the country, using its vast network of 1,55,000 post
offices.
Of its total
network, about 1,39,040 post offices are in rural areas. Going by a 2011
estimate of the postal department, about 6,000 people are covered on average by
post-offices in rural areas and about 24,000 in urban areas.
Through its various
saving schemes, Postal department handles deposits to the tune of Rs 6,00,000
crore.
As Firstbiz noted
earlier, India Post’s entry into banking can be game changer in rural banking
given the massive reach of Post in the far-flung areas of the country and local
knowledge.
The department has
already commenced the process of linking all its branches through
technology, besides setting up ATMs across the country.
The development has
come at a time the RBI is opening up the banking sector to differentiated banks
or banks with specific areas of focus such as payments banks and small banks.
Payment banks can engage in accepting small deposits, offer ATM/debit cards,
payments and remittance services through various channels. They can also offer
financial products like mutual fund units and insurance products.
Small finance banks,
on the other hand, are almost like full service commercial banks. However,
these banks cannot engage in large value transactions since 75 percent of their
loans must be lent to the so-called priority sector. For existing banks, this
requirement is 40 percent. Also, at least 50 percent of their loan portfolio
should constitute loans and advances of up to Rs 25 lakh.
India Post,
however, is not keen to set up a small bank or payments bank and, instead,
wants a full service banking licence, the official quoted earlier said.
