Tuesday, September 24, 2013

India Post pushes ahead with banking plan despite opposition

Mumbai: Despite strong opposition from the finance ministry, the postal department plans to approach the Union cabinet next month seeking capital of up to Rs.1,900 crore for a proposed commercial bank, according to two people familiar with the development.

To be called Post Bank of India, its branches will be linked to India Post’s vast network of post offices and will promote goals of financial inclusion, its supporters say.

“The department has decided to move the cabinet by October to seek the capital for Post Bank,” said a senior bureaucrat familiar with the proposal. The official requested anonymity, citing sensitivity of the matter. The second person, a consultant, also declined to be identified.

An email sent to financial services secretary Rajiv Takru on Tuesday remained unanswered at the time of writing this story.

India Post needs the government’s permission for the Rs.500 crore capital that is needed to set up the bank if it gets a licence from the Reserve Bank of India (RBI). While many government departments support the plan, some—mainly the department of financial services—have raised serious reservations, the official quoted earlier said.

India Post estimates an immediate requirement of Rs.700 crore and an additional Rs.1,200 crore in the first five years of its operations.

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