NEW DELHI: The neighbourhood post office may soon become a full-fledged bank as the government could facilitate a bank licence for India Post as part of a multi-pronged strategy to achieve greater financial inclusion.
The Reserve Bank of India is expected to soon come out with draft guidelines on licences to new banks.
“India Post is a strong contender for banking license given its spread across the country,” said a finance ministry official.
The postal department already works as a quasi bank, providing a host of savings products, postal life insurance, pension payments and money transfer services through its 1.55 lakh branches, more than any other bank.
It, however, does not provide credit, the most important bit of financial inclusion. A banking licence will help fill that gap enabling the delivery of modern banking facilities in areas lacking access to financial products, credit and savings.
The department is expected to soon seek the required clearances from the Postal Services Board to expedite the process.
The Department of Post has already hired international consultancy firm Accenture to modernise the post offices across the country, which will also help create infrastructure for banking services.
“Once the infrastructure in place, we will able to assess if we need to rope in another player or not and accordingly get clearances from the RBI,” said an official with the Department of Post, adding that a Cabinet approval will also be required before commencing operations.
The idea of the Department of Post evolving into a bank has been around for a while. In 2006, India Post had even decided to appoint consultants to chalk out a regime for the transformation.
“There was a proposal to set up a bank with an initial capital of Rs 1,000 crore. The bank was to be set up as a subsidiary with the postal department holding a 51% stake in it,” said the finance ministry official.
More recently, the idea of a banking licence for India post was discussed in the inter-ministerial committee for financial inclusion, said an official of the Postal Services Board adding that the organisation was keen to provide banking services.
It is already working on core banking solution (CBS) for nearly 4,000 of its branches, which will allow customers to operate their accounts from any of the networked branches. The department has provided for Rs 106 crore towards development of CBS software.
Both the government and RBI have indicated that financial inclusion will be major criteria for giving new banking licences. “The final decision on granting a new licence will be taken by RBI. It will be a consultative decision as India Post is a government arm,” the official said.
A government committee on financial inclusion had also recommended that “India Post, with its ubiquitous reach should actively position itself to offer a low-cost, light-weight bank account to anyone enrolling for a Unique Identity Number.”
As per the committee report, nearly 16 crore people use India Post to save Rs 3,23,781 crore as on March 31, 2007. Out of this, deposits in savings bank account alone is Rs 16,789 crore, which makes a strong case for India Post to deepen the level of financial transactions and offer banking services to the rural population.
The Thirteenth Finance Commission has even proposed a budget of Rs 3,000 crore to be used for delivering an incentive of Rs 100 into the bank account of each BPL resident who enrolls for the UID Project.
(UIDAI).
The Reserve Bank of India is expected to soon come out with draft guidelines on licences to new banks.
“India Post is a strong contender for banking license given its spread across the country,” said a finance ministry official.
The postal department already works as a quasi bank, providing a host of savings products, postal life insurance, pension payments and money transfer services through its 1.55 lakh branches, more than any other bank.
It, however, does not provide credit, the most important bit of financial inclusion. A banking licence will help fill that gap enabling the delivery of modern banking facilities in areas lacking access to financial products, credit and savings.
The department is expected to soon seek the required clearances from the Postal Services Board to expedite the process.
The Department of Post has already hired international consultancy firm Accenture to modernise the post offices across the country, which will also help create infrastructure for banking services.
“Once the infrastructure in place, we will able to assess if we need to rope in another player or not and accordingly get clearances from the RBI,” said an official with the Department of Post, adding that a Cabinet approval will also be required before commencing operations.
The idea of the Department of Post evolving into a bank has been around for a while. In 2006, India Post had even decided to appoint consultants to chalk out a regime for the transformation.
“There was a proposal to set up a bank with an initial capital of Rs 1,000 crore. The bank was to be set up as a subsidiary with the postal department holding a 51% stake in it,” said the finance ministry official.
More recently, the idea of a banking licence for India post was discussed in the inter-ministerial committee for financial inclusion, said an official of the Postal Services Board adding that the organisation was keen to provide banking services.
It is already working on core banking solution (CBS) for nearly 4,000 of its branches, which will allow customers to operate their accounts from any of the networked branches. The department has provided for Rs 106 crore towards development of CBS software.
Both the government and RBI have indicated that financial inclusion will be major criteria for giving new banking licences. “The final decision on granting a new licence will be taken by RBI. It will be a consultative decision as India Post is a government arm,” the official said.
A government committee on financial inclusion had also recommended that “India Post, with its ubiquitous reach should actively position itself to offer a low-cost, light-weight bank account to anyone enrolling for a Unique Identity Number.”
As per the committee report, nearly 16 crore people use India Post to save Rs 3,23,781 crore as on March 31, 2007. Out of this, deposits in savings bank account alone is Rs 16,789 crore, which makes a strong case for India Post to deepen the level of financial transactions and offer banking services to the rural population.
The Thirteenth Finance Commission has even proposed a budget of Rs 3,000 crore to be used for delivering an incentive of Rs 100 into the bank account of each BPL resident who enrolls for the UID Project.
(UIDAI).
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