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 Thursdayat 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 boostforits 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 backingthe 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 linkingall 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.
.jpg)
.jpg)
