India Post bank may need Cabinet nod
By Arun S
The department of financial services (DFS) in the
finance ministry has insisted that the department of
posts (India Post), which had applied to RBI for a
bank licence, must get the Cabinet's approval for its
plan. Earlier, DFS had objected to India Post's
proposal, arguing that the latter lacked the capacity,
technology and expertise to run a bank.
An earlier India Post cabinet note on this was
withdrawn in the context of the DFS's objection and
observations made by other ministries. India Post
had applied for the licence even before it circulated
the cabinet note. The DFS is now putting its foot
down, virtually saying the RBI could consider the
proposal only after the cabinet vetted the plan. "India
Post is not a government company to decide on
such matters on its own. (What is being proposed) is
also not a government bank like the Bharatiya
Mahila Bank," a senior finance ministry official told
FE. He said that RBI too was likely to ask India Post
whether cabinet approval is obtained for the plan.
There are around 1.55 lakh post offices across the
country including 1.4 lakh post offices in rural areas,
15,000 in urban areas and another 30,000 points of
presence. Since post offices have a such a large
network reaching even the most remote corners of
the country and already offer many financial services
for urban and rural people, it was argued by India
Post that a banking licence for it would help expedite
the government's financial inclusion programme, and
increase savings as well as investment.
However, the DFS had opposed the proposal citing
India Post's the inexperience in lending, inefficiency
in functioning and a lack of an interconnected
system to ensure that people get to access their
money anywhere and at anytime like the banks, the
sources said. Of the total 1.55 lakh post offices, only
a little over 20,000 are computerised, they added.
The department of posts had reduced its estimates
for the amount needed to roll-out the proposed bank
from an initial R1,900 crore to R623 crore, the
sources said, adding however that more money will
be required later for its expansion.
India Post, which is looking at setting up a separate
banking entity with a new team of professionals as
against converting its post offices into bank
branches bank — has gone for the wholly-owned
Non-Operative Financial Holding Company model as
required by the RBI. It is also working on a core
banking solutions-like system for their proposed
bank. Incidentally, the government had started a
R4,909 crore-worth information technology-driven
project to modernise the postal network. The
government had allocated R532 crore in 2013-14 to
make post offices a part of the core banking solution
and help it offer real time banking services.
Courtesy: FINANCIAL EXPRESS
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