Dear Comrades,
This refers to 'Let the Postman Knock Twice' (ET, July 16). All you have said on India Post's eligibility to get a bank licence is correct, but with a few caveats.
It has no experience in lending, and financial inclusion would only mean a collection of deposits that will build up the liability side of the balance sheet of the new bank. While India Post is capable of running on sound commercial principles, it may not be possible to function at an arms- length from its political masters.
Witness the track record of public sector banks that have piled up a large chunk of non performing assets, courtesy political masters. India Post, like other public sector banks, may not spread formal credit in rural areas.
So, financial inclusion would be incomplete. The government may infuse required capital, but that would be done only on its terms. The relationship would only make the business of banking more vulnerable.
It has no experience in lending, and financial inclusion would only mean a collection of deposits that will build up the liability side of the balance sheet of the new bank. While India Post is capable of running on sound commercial principles, it may not be possible to function at an arms- length from its political masters.
Witness the track record of public sector banks that have piled up a large chunk of non performing assets, courtesy political masters. India Post, like other public sector banks, may not spread formal credit in rural areas.
So, financial inclusion would be incomplete. The government may infuse required capital, but that would be done only on its terms. The relationship would only make the business of banking more vulnerable.
http://economictimes.indiatimes.com
