NEW DELHI:
The Reserve Bank of India having opened the window for new bank licences,
the postal department is
finalizing the blueprint to set up a bank of its own at your neighbourhood post
office, a move that will challenge the dominance of large public sector lenders
in smaller towns and rural India.
While the
department already has a balance sheet of Rs 6.18 lakh crore, which includes
deposits of around 5.5 lakh crore, it is expected to set up a new entity that
will function as the bank. Transferring the existing deposit base to the bank
or converting the entity into a bank will entail an initial capital base of
around Rs 55,000 crore to meet RBI's requirement, which the government will
find difficult to provide. So, the proposed bank will start with the minimum
capital requirement of Rs 500 crore, said a source familiar with the
development.
"This
will benefit rural areas enormously. There are nearly 1.55 lakh post offices
and no capital cost of building is required. We are connecting post offices. As
it is, we are offering savings bank in post offices and this is a natural
progression. The matter is under discussion with the finance ministry and
RBI," communications and IT minister Kapil Sibal told TOI.
The postal
department has appointed Ernst & Young as consultant for the project and
based on the detailed project report, it will approach the Union cabinet for a
final go ahead.
A source
said that the new entity will have its own board and guidelines that comply
with RBI regulations. Although there are several examples of postal departments
getting into banking — ranging from the German and Italian model, to those in
South Africa and Japan — sources said the India model will be a lot different
given the country's vast geographical spread and low level of banking
penetration.
Among the
various suitors, the postal department has one of the strongest cases to set up
a bank given its massive reach across the country with 1.53 lakh post offices,
almost all offering savings bank facilities. In all, there are 23.3 crore
savings bank accounts with deposits adding up to Rs 3.8 lakh crore at the end
of March 2012. "In a way it is already a savings bank. All that we want to
do is make it a commercial bank," said a source.
The plan
is to penetrate rural areas and smaller towns, which is also in line with the
government's stated aim of offering banking facilities in the hinterland. Over
a period of time, services such as investment banking will be added so that the
bank becomes a full-fledged financial services entity.
The postal
department has already initiated steps to connect post offices through an
electronic network, which will be useful while setting up a bank. Connectivity
ensures that customers can transact business through any branch in the country.
It has also ordered the procurement of over 800 ATMs
But
manpower issues are going to be a big challenge. "Getting direction is one
thing, developing or procuring capability is another thing altogether. If the regulator
is convinced, capability will follow," said Ashvin Parekh, partner and
national leader for financial services at consulting firm E&Y. Parekh,
however, refused to discuss the issue further as his firm is advising the
postal department on its banking foray.
Source
Times of India 14 March 2013.
