The
RBI’s decision on Wednesday to “consider” the application of Department of Posts
for a banking license “separately in consultation with the Government of India”
is literally a slap in the face for the finance ministry.
Out
of the 25 applicants that were in the fray for a new license, the RBI granted “in-principle” approval for two - IDFC
and Bandhan Financial Services - while setting aside the application of the Department
of Posts to be decided separately. If the finance ministry had given permission
earlier, the RBI could have issued a license to the Department for “Post Bank
of India” as well.
While
prior clearance of their parent company was necessary for the private players
who had applied for a license, for the postal department, it was the clearance
of the government of India, or more specifically, the finance ministry that was
mandatory. Without such a clearance, the RBI could have rejected the
application, which it didn't do. Had the government given its clearance, most
probably the Post Bank too could have commenced its operations along with the
other two licensees.
The
Department of Posts has been trying to get the clearance of the finance
ministry for some time now, but for some strange reason, the finance ministry
has been dragging its feet. According to knowledgeable sources, the RBI was
very keen and has even met with the ministry, but nothing fructified. It was
clearly a case of the government defeating its own proclaimed aim of financial
inclusion. There is no other institution, not even the network of public sector
banks, that could help financial inclusion in a way that the the postal
department is capable of.
If
the Post Bank of India is operationalised, all the 1.54 lakh post offices, out
of which about 90 per cent are in rural areas, by default will become a “bank”.
These “banks” will be more accessible to the common people, because they have
been right there for decades in their neighbourhood: there is a post office for
every 7176 people in the country and in rural areas, the coverage is even
better - one for every 5682 people. In fact, when the UPA government was
struggling to find a way to transfer the wages for NREGA beneficiaries, it was
this network that came to its rescue. About 2.2 crore people get their NREGA
payments through the post offices.
Financial
services are not new to post offices because for several decades, they have
been running the post office savings scheme. Besides the extremely high
penetration of the post offices, in rural areas, there are about 2.69 lakh
agents (Grameen Dak Sevaks) who come home to help people with banking. Almost
all these agents are also people from the neighbourhood and are familiar with
the beneficiaries.
It
is a unique banking eco-system that only Indian Post can claim credit for. It
is a model that has evolved over time and is very hard to replicate because it
is driven by the sheer needs of people, and nourished by trust and
relationships.
This
is where the finance ministry’s role is suspect. Why hasn’t it granted the
permission to the Department of Posts when the RBI doesn’t have any objections.
Who is it trying to protect? Isn’t it its commitment to financial inclusion a
sham?
Interestingly,
Kapil Sibal, the minister for posts, and even Rahul
Gandhi couldn't get a
government decision favouring the Postal Bank. Sibal reportedly was very keen
while Rahul
Gandhi, as usual, had his
attention diverted.
As
the RBI press release notes, financial inclusion was the stated objective for
giving additional banking licenses.
"In
the budget speech of the Union Finance Minister for the year 2010-11, it was
announced, inter alia, that there was a need to extend the geographic
coverage of banks and improve access to banking services and that RBI was
considering giving some additional banking licences to private sector players,”
the central bank said.
Why
was the most eligible candidate excluded?
Anyway
the RBI has a mind of its own and has apparently not given into the
government’s indifference. It has kept the option of the Postal Bank open and
will follow up with the financial ministry. How long will the ministry block
it? Will the next government take a favourable decision?
The
reasons are certainly more than what meets the eye.
Source :FIRSTPOST.INDIA
Source :FIRSTPOST.INDIA
