Mumbai: The finance ministry has opposed India Post’s
plan to seek a commercial banking licence from the Reserve Bank of
India (RBI) on grounds that the postal service doesn’t have the
expertise needed in relevant areas, such as handling credit.
India Post is keen to
set up a commercial bank called the Post Bank of India, arguing that it
can significantly boost financial inclusion in Asia’s third largest
economy through its nationwide network of 155,000 post offices.This will also allow the organization, which posted a loss of Rs.6,346
crore in fiscal 2012, to make up for business dropping off over the
years as letter writing dwindled and private courier firms took away
market share.Losses have significantly increased in recent years on account of higher expenses.
However, the finance
ministry’s department of financial services doubts India Post’s ability
to set up and run a bank, according to a senior postal department
official who didn’t want to be named.Some of the country’s
large public sector banks have also been lobbying against the proposal,
concerned that India Post, with its vast branch network, could pose a
threat to their business, said the official, who’s directly involved
with the proposal.
“The larger idea of
setting up a bank is to further the cause of financial inclusion. Entry
of India Post into banking can significantly help address this
situation,” the official said.However, “They (finance
ministry officials) are asking too many questions. Why (do) you need a
bank? What is your expertise to run a bank?” the official said.India Post is engaged in
several related functions, such as running a savings bank scheme,
selling tax-saving instruments and accepting public provident fund
deposits. The government also uses post office accounts to route
payments to beneficiaries as part of the rural jobs programme and the
direct transfer of subsidies.A former government official said the postal department should focus on its existing business.“It is totally illogical
for the postal department to enter into banking. They do not have the
experience in handling credit or the ability to manage a bank,” said D.K. Mittal, who was finance secretary till recently.“Mere experience in
collecting deposits under the post office scheme is not enough. The
department should ideally focus on improving their core activity.”According to Mittal, the department should adopt new technology and try to become profitable instead of diversifying operations.Emails to financial services secretary Rajiv Takru last week remained unanswered.
RBI invited applications
from private and public sector entities in February to set up banks,
three years after former finance minister Pranab Mukherjee made the suggestion and nine years after the last round of licences were issued.The application deadline expires on 1 July. The minimum capital required by applicants is Rs.500 crore.
