Tuesday, January 13, 2015

Government mulls legislative route for setting up Postal Bank

NEW DELHI: The government is looking at taking the legislative route, by next  month, to finalize the setting up of Postal Bank of India and will soon approach  RBI to consider the postal department's application for banking licence.

In a recent meeting chaired by Prime Minister Narendra Modi, the Department of Posts (DoP)  said that it is ready to move into the banking space by becoming a universal  bank, sources said.

According to a presentation given to the Prime Minister, DoP, in consultation  with the government, may approach RBI this month to consider its original  application for a universal bank, the source said.

"Simultaneously,  modalities for the alternative of taking the legislative route to set up Postal
Bank of India (PBI) would be worked out in February," the source said.

The meeting, which was also attended by Communications and IT Minister Ravi Shankar Prasad, discussed the proposals of the 'Task Force on Leveraging the Post Office  Network' and the way forward to implement the recommendations.

The  Reserve Bank of India (RBI) in August last year said that the Union government  has to take a final call on application for banking licence by DoP.

The  sources said to begin with, DoP proposes to have Post Office Savings Bank (POSB)  to run parallel to the PBI, which can eventually become part of the PBI as  suggested by the Task Force.

The source said post offices as front of PBI shall offer full  banking services to the customers whereas PBI branches shall only handle the  back office operations such as processing of loan applications, credit  worthiness and risk assessment, investment operations etc.

"PBI will  also offer the facility of opening institutional accounts, like for panchayats,  micro credit agencies, along with new schemes and market linked rates," the  source added.

Modi had set up the Task Force in 2014 to leverage the postal network in India  and to enhance the role of India Post in financial inclusion, among other  services like delivery of goods for eCommerce firms.

In December last  year, the Task Force had submitted its rport to Prasad. It noted that with its  Rs 6 lakh crore in deposits, India Post is second only to the country's largest  bank SBI.

The  report suggested that the government should set up a holding company under the DoP for immediate roll out of banking, insurance and e-commerce  services.

The holding company should have five different verticals, and  three of them -- banking, insurance and e-commerce -- can start working  immediately.

The panel had suggested establishing PBI as a separate  entity with a branch in each district in the first three years with initial  capital of Rs 500 crore to be funded by the government.

PBI and Prime  Minister's Jan  Dhan Yojanacan compliment each other for financial inclusion, former Cabinet Secretary TSR  Subramanian, who headed the task force, had said.

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