The cabinet has rejected the India Post proposal for
starting commercial banking services on the ground that it does not have the
expertise to handle banking operations as a result of which the venture was not
likely to be viable.
Top government sources said the proposal for starting
commercial banking services by India Post that was aimed at enhancing financial
inclusion through the wide network of the organization has been dropped by the
cabinet after the finance ministry expressed reservations over the proposal.
The proposal needed an immediate transfusion of Rs 1,900
crore by the government.
However, the postal department has a poor financial track
record. It has piled up huge losses over the last 11 years and has been losing
badly to private couriers. India Post reported a loss of Rs 6,346 crore in
fiscal 2011-12 which weighed against its credibility.
However, India Post is doing well on the savings front.
Its outstanding balance under the Post Office Savings Scheme stood at Rs 6.05
lakh crore on March 31, 2013. This is half the deposits of State Bank of India
and double that of the largest private lender ICICI Bank.
The postal department is one of 26 contenders for banking
licenses. It had moved the proposal to the cabinet in order to enable it to
meet the financial eligibility criteria of the Reserve Bank of India for new
bank licenses to be issued by January next year.
India Post needs the government’s permission for the Rs
700 crore capital that is needed to set up the bank if it gets a licence. It
will then require an additional Rs 1,200 crore in the first five years of its
operations.
Unfortunately, over half of the population in rural
India, do not have a bank account and the proposal for a postal bank would have
a negative impact on government’s push to financial inclusion. The postal
department has close to 1.55 lakh offices across country, with 1,39,040 in
rural areas.India Post reported a loss of Rs 6,346 crore in fiscal 2011-12.
http://in.finance.yahoo.com/news/cabinet-grounds-india-post-bank-plans-074832082.html
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