Cabinet grounds India Post bank plans
By Mail Today | Yahoo Finance India – Mon 14 Oct, 2013 1:18 PM
IST
The cabinet has rejected the India
Post proposal for starting commercial banking services on the ground that it
does not have the expertise to handle banking operations as a result of which
the venture was not likely to be viable.
Top government sources said the proposal for starting commercial banking
services by India Post that was aimed at enhancing financial inclusion through
the wide network of the organization has been dropped by the cabinet after the
finance ministry expressed reservations over the proposal.
The proposal needed an immediate transfusion of Rs 1,900 crore by the
government.
However, the postal department has a poor financial track record. It has piled
up huge losses over the last 11 years and has been losing badly to private
couriers. India Post reported a loss of Rs 6,346 crore in fiscal 2011-12 which
weighed against its credibility.
However, India Post is doing well on the savings front. Its outstanding balance
under the Post Office Savings Scheme stood at Rs 6.05 lakh crore on March 31,
2013. This is half the deposits of State Bank of India and double that of the
largest private lender ICICI Bank.
The postal department is one of 26 contenders for banking licenses. It had
moved the proposal to the cabinet in order to enable it to meet the financial
eligibility criteria of the Reserve Bank of India for new bank licenses to be
issued by January next year.
India Post needs the government’s permission for the Rs 700 crore capital that
is needed to set up the bank if it gets a licence. It will then require an
additional Rs 1,200 crore in the first five years of its operations.
Unfortunately, over half of the population in rural India, do not have a bank
account and the proposal for a postal bank would have a negative impact on
government’s push to financial inclusion. The postal department has close to
1.55 lakh offices across country, with 1,39,040 in rural areas.
India Post reported a loss of Rs 6,346 crore in fiscal 2011-12.
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