Dear Comrades,
While there were mostly usual suspects among the list of 26 applicants for a bank licence, few came as a surprise. And there were one unusual name too, though its banking ambition was well known.
The application by the Indian Postal department, which is a division of the ministry of communication and information technology, has raised some curiosity in the Reserve Bank of India (RBI). This was because RBI’s new bank licence norms – that was released in February this year – talked about new bank licence in the ‘private’ sector. Since India Post is a part of the ministry, it cannot be considered as a private sector entity.
According to central banking sources, to be eligible for a bank licence, India Post will have to become a corporate. A department government of India cannot come under Reserve Bank of India purview. For example, is they are found violating know your customer or anti money laundering norms, how can the regulator impose penalty against the sovereign,” said a source.
India Post was having ambition to diversify into a bank and was in discussion with regulator for quite some time regarding the same.
According to experts, while the postal department’s huge rural presence definitely gives them an edge to get a licence since both the central bank and government is emphasising on financial inclusion.
“Though technically, there are challenges on whether it fulfills the prescribed criteria, but its reach definitely makes it a strong contender,” sources said.
According to the final guidelines on new bank licence, RBI has mandated 25% of the branches needs to opened in unbanked rural areas and meeting priority sector norms from inception.
There are examples globally when the postal department diversifies into lending activity. Deutsche Postbank – the Bonn headquarted German retail bank -- was formed from the demerger of the postal savings division of Deutsche Bundespost in 1990.
With around 14 million clients, 19,000 employees and total assets amounting to €170 billion, the Postbank Group is one of Germany's largest financial service providers. According to its website, the lender focuses on business with private customers and with small and medium-sized companies.
The 26 entities that have applied for banking licence includes corporate houses like Tata, Birla and Anil Ambani, heavy engineering major L&T and a host of non-banking financial companies including a gold loan company. Two mirco finance companies have also applied. Some experts, however, the number of applicants to be higher.
“Of the 26 applicants, there are usual suspects, but there are some surprises too. There are few names which meet the minimum requirement but may rank low in terms of relative probability to get a licence. We expected higher number of applicants, may be around 30-35,” said Monish Shah, Senior Director, Deloitte Touche Tohmatsu India.
The application by the Indian Postal department, which is a division of the ministry of communication and information technology, has raised some curiosity in the Reserve Bank of India (RBI). This was because RBI’s new bank licence norms – that was released in February this year – talked about new bank licence in the ‘private’ sector. Since India Post is a part of the ministry, it cannot be considered as a private sector entity.
According to central banking sources, to be eligible for a bank licence, India Post will have to become a corporate. A department government of India cannot come under Reserve Bank of India purview. For example, is they are found violating know your customer or anti money laundering norms, how can the regulator impose penalty against the sovereign,” said a source.
India Post was having ambition to diversify into a bank and was in discussion with regulator for quite some time regarding the same.
According to experts, while the postal department’s huge rural presence definitely gives them an edge to get a licence since both the central bank and government is emphasising on financial inclusion.
“Though technically, there are challenges on whether it fulfills the prescribed criteria, but its reach definitely makes it a strong contender,” sources said.
According to the final guidelines on new bank licence, RBI has mandated 25% of the branches needs to opened in unbanked rural areas and meeting priority sector norms from inception.
There are examples globally when the postal department diversifies into lending activity. Deutsche Postbank – the Bonn headquarted German retail bank -- was formed from the demerger of the postal savings division of Deutsche Bundespost in 1990.
With around 14 million clients, 19,000 employees and total assets amounting to €170 billion, the Postbank Group is one of Germany's largest financial service providers. According to its website, the lender focuses on business with private customers and with small and medium-sized companies.
The 26 entities that have applied for banking licence includes corporate houses like Tata, Birla and Anil Ambani, heavy engineering major L&T and a host of non-banking financial companies including a gold loan company. Two mirco finance companies have also applied. Some experts, however, the number of applicants to be higher.
“Of the 26 applicants, there are usual suspects, but there are some surprises too. There are few names which meet the minimum requirement but may rank low in terms of relative probability to get a licence. We expected higher number of applicants, may be around 30-35,” said Monish Shah, Senior Director, Deloitte Touche Tohmatsu India.
http://www.business-standard.com
