Dear Comrades,
The panel opines Rs 500 crore needed as initial paid up capital for launching Post Banks might not be feasible at present
The long-cherished dream of Department of Posts to launch full-fledged banking operations seems to have hit a roadblock as the Planning Commission has opposed government funding for starting a Post Bank of India.
Officials said the Commission is of the view that the Rs 500 crore needed as initial paid up capital for launching Post Banks might not be feasible at the moment because of overall tight fiscal conditions.
"Though in-principle the Commission does support the proposal, but current weak financial condition is acting as a hindrance," a senior official said.
The Department of Post has moved a Cabinet note for the government providing Rs 500 crore as initial capital to India Post for this purpose. This is the minimum paid up capital required under the norms for banking licences put up by the Reserve Bank of India. In total it needs around Rs 1,900 crore to run full-fledged banking operations.
Financial help from the government is needed since India Post ran a deficit of Rs 5,805.9, crore in 2011-12, though 8.5% lower than Rs 7,899.3 crore in the previous year.
India Post plans to start banking operations in 50 branches, a key official said. Officials said a section within the Planning Commission is also of the opinion that converting a part of the Post Offices into full-fledged banking operations could deviate post offices from their core functioning.
The department of posts had applied for a formal banking licence to leverage its huge infrastructure into banking operations.
The facility is also beneficial for the government to expand its ambitious Direct Benefit Transfer (DBT) programme as post offices have around 150,000 branches across the country, much more than all the public sector banks taken together. The banking correspondent model as enshrined in DBT will be performed by postman.
He will get an additional commission of 0.07% over and above his regular salary for every new deposit. The official said that moves are also afoot to link all post office branches with core banking solutions (CBS), which would further enable them to function as a full-fledged bank.
To become a bank, India post will have to restructure its shareholding. There is a stipulation in the RBI's norms that promoter companies of entities wishing to set up banks should be 51% held by the public. At present, India post is 100% government of India holding.
A few years back too, a proposal of India Post to start banking operations was opposed by the finance ministry as the postal service doesn’t have the expertise needed in relevant areas, such as handling credit.
The Department of Post has a few savings instruments like post office savings scheme, besides acting as a distributor for mutual fund companies. It also has a life insurance scheme— Postal Life Insurance.
Officials said the Commission is of the view that the Rs 500 crore needed as initial paid up capital for launching Post Banks might not be feasible at the moment because of overall tight fiscal conditions.
"Though in-principle the Commission does support the proposal, but current weak financial condition is acting as a hindrance," a senior official said.
The Department of Post has moved a Cabinet note for the government providing Rs 500 crore as initial capital to India Post for this purpose. This is the minimum paid up capital required under the norms for banking licences put up by the Reserve Bank of India. In total it needs around Rs 1,900 crore to run full-fledged banking operations.
Financial help from the government is needed since India Post ran a deficit of Rs 5,805.9, crore in 2011-12, though 8.5% lower than Rs 7,899.3 crore in the previous year.
India Post plans to start banking operations in 50 branches, a key official said. Officials said a section within the Planning Commission is also of the opinion that converting a part of the Post Offices into full-fledged banking operations could deviate post offices from their core functioning.
The department of posts had applied for a formal banking licence to leverage its huge infrastructure into banking operations.
The facility is also beneficial for the government to expand its ambitious Direct Benefit Transfer (DBT) programme as post offices have around 150,000 branches across the country, much more than all the public sector banks taken together. The banking correspondent model as enshrined in DBT will be performed by postman.
He will get an additional commission of 0.07% over and above his regular salary for every new deposit. The official said that moves are also afoot to link all post office branches with core banking solutions (CBS), which would further enable them to function as a full-fledged bank.
To become a bank, India post will have to restructure its shareholding. There is a stipulation in the RBI's norms that promoter companies of entities wishing to set up banks should be 51% held by the public. At present, India post is 100% government of India holding.
A few years back too, a proposal of India Post to start banking operations was opposed by the finance ministry as the postal service doesn’t have the expertise needed in relevant areas, such as handling credit.
The Department of Post has a few savings instruments like post office savings scheme, besides acting as a distributor for mutual fund companies. It also has a life insurance scheme— Postal Life Insurance.
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