The Department of Posts will move a Cabinet note in order to apply for a banking license by the stipulated deadline of July 1, a senior official has said, even as a top Finance Ministry went public with doubts over the efficacy of the post office being converted into a bank.
“We are moving a cabinet note now and after that we will be applying for the licence. After the cabinet note, we will go ahead with setting up the bank,” Postal Services Board’s member, planning, Suneeta Trivedi, told PTI.
Ms. Trivedi asserted that the Department will be making the application by July 1, which is the last date set by the Reserve Bank for receiving applications.
The department of Posts has engaged consultancy firm Ernst & Young for helping it at the application stage by creating the “whole concept” of the bank and has already gathered all the know-how to enter the fray.
However, Department of Financial Services Secretary Rajiv Takru seemed to be not so much interested at the prospect of India Posts entering the banking fray.
There is a lot more to banking than merely having the reach and opening savings accounts, he told reporters, adding that it also involves very complex things at the back end and seemed to suggest that a Japan-like case, where the postal department has a bank, may not work in the country.
When asked about the same, Ms. Trivedi said, “We have worked out all on the know how, about everything. There is nothing like that” and added that there is no rethink on the part of the Postal department.
Sector watchers suggest that if financial inclusion is the ultimate aim in granting new licences in this round, the entry of the department will be highly beneficial to the agenda being pursued by the Reserve Bank and the Government.
According to available data, the department had 154,822 branches as of March 31, 2013 with 139,086 or 90 per cent of them, in rural areas, which is four times the total number of rural branches of the entire banking system.
When asked about the strengths of the Postal Department, apart from the reach, Ms. Trivedi said, “The number of accounts we have, the type of people who come, the amount of money we are handling or the float...it’s much more than many banks put together.”
The Reserve Bank had in February made public its final guidelines for the entry of new banks, which did not restrict state—run companies from applying. It followed up by clarifying over 400 questions last week, in which it made a few relaxations like the period for setting up of the bank since the granting of the in—principle nods.
Other government—run companies, like Power Finance Corporation and Rural Electrification Corporation, are also mulling to enter the fray.