India Post needs to apply afresh for bank licence

May 25 2014, 11:00 IST
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India Post will have to apply afresh to the Reserve Bank under differential licence guidelines if it wishes to start banking operations. (FE Photo: M Z Zulfi) India Post will have to apply afresh to the Reserve Bank under differential licence guidelines if it wishes to start banking operations. (FE Photo: M Z Zulfi)
SummaryIndia Post will have to apply afresh to the Reserve Bank under differential licence guidelines if it wishes to start banking operations.

India Post will have to apply afresh to the Reserve Bank under differential licence guidelines if it wishes to start banking operations.

According to sources, aspirants, including the Department of Post, will have to apply once again after guidelines on differential bank licences are issued in the next few months.

India Post was one among the 25 unsuccessful contenders for new bank licences. The Reserve Bank of India (RBI) last month granted licences only to IDFC and Bandhan Financial Services Pvt Ltd.

The applicants also included state-run IFCI and private sector Anil Ambani group and Aditya Birla group, Bajaj Finance, Muthoot Finance, Religare Enterprises and Shriram Capital.

Recently, RBI Governor Raghuram Rajan had said it is committed to freeing entry in banking.

"We just announced two new commercial bank licences after a rigorous vetting process. We are examining this experience, and after making appropriate changes, will announce a more regular process of giving licences – what has been termed licenses on tap," he had said

At present, there are 27 public sector banks and 22 private sector lenders in the country.

"The RBI can take more of a chance with new players if they get the licence to open only a small bank or to conduct only one segment of banking business. Such differentiated licences – licences with restrictions on the geographical reach or the products offered by a new bank – can generate more organisational variety and efficiency," Rajan had said.

Small banks tend to be better at catering to local needs, including needs of small and medium businesses, he had said.

A payments bank, which will take deposits and offer payment and remittance services but be constrained to invest all its funds in safe instruments such as government securities, could be very synergistic with other existing services, he had said.

"For example, the proposed Post Bank could start as a payment bank, making use of post office outlets to raise deposits and make payments," he had said.

New bank licences were issued by RBI in April to IDFC and Bandhan after a decade. Before this, the central bank had awarded licences to Kotak Mahindra Bank and Yes Bank in 2003-04.

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