Millennium Post

DoP to seek Cabinet nod for `1,900 cr funds for setting up Post Banks

Department of Posts has started inter-ministerial consultations for seeking Cabinet approval on around Rs 1,900 crore fund requirement to start Post Banks in the country.

'DoP will need around Rs 1,900 crore to start Post Banks in the country. This includes Rs 500 crore paid-up capital required under new banking licence guidelines and rest is for other capital adequacy norms that Post Banks will need to fulfil. Cabinet note has gone to various ministries to seek their views,' a government official said.

The Department of Posts (DoP) has plans to apply for banking licence to offer full-fledged banking services along with postal services through post offices.The RBI has issued comprehensive guidelines for new bank licences. It has fixed 1 July  as the last date for filing application by interested entities. The DoP has proposed to start 50 bank branches in the first year and scale it to a total of 150 branches in 5 years.
There are around 90,000 bank branches in the country and provision of real-time banking services through postal network is estimated to triple the current banking network.

Finance Minister P Chidambaram in this year's Budget speech said Post offices will become part of the core banking solution (CBS) and offer real time banking services. He proposed provision of Rs 532 crore for the project in 2013-14.
The Post Banks are proposed to be owned by DoP but with a completely independent board, governance structure and operations. It will have representation from Ministries of Finance and Communication & IT. The branches in first phase will be opened in tier 1 to even very small cities with foucs on rural and retail micro, small and medium enterprises,' the official said.

India postal network has 1,54,822 post offices in the country. Of these, 1,39,086 are in rural areas and 15,736 are in urban regions. Postal Services Board's member, planning, Suneeta Trivedi, told PTI that the Department will be making the application by July 1.The department of Posts has engaged consultancy firm Ernst & Young for helping it at the application stage by creating the 'whole concept' of the bank and has already gathered all the know-how to enter the fray.

A top Finance Ministry official, however, has expressed doubts over the efficacy of the post office being converted into a bank.
There is a lot more to banking than merely having the reach and opening savings accounts, Department of Financial Services Secretary Rajiv Takru had told reporters in Mumbai last week.

It also involves very complex things at the back end and seemed to suggest that a Japan-like case, where postal department has a bank, may not work in the country, he had said.

When asked about the same, Trivdei said, 'We have worked out all on the know how, about everything. There is nothing like that' and added that there is no rethink on the part of the Postal department.Sector watchers suggest that if financial inclusion is the ultimate aim in granting new licences in this round, the entry of the department will be highly beneficial to the agenda being pursued by the Reserve Bank and the Government.
According to available data, the department had 154,822 branches as of March 31, 2013 with 139,086 or 90 per cent of them, in rural areas, which is four times the total number of rural branches of the entire banking system.When asked about the strengths of the Postal Department, apart from the reach, Trivedi said, 'The number of accounts we have, the type of people who come, the amount of money we are handling or the's much more than many banks put together.'
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