This
refers to ‘Let the Postman Knock Twice’ (ET, July 16). All you have
said on India Post’s eligibility to get a bank licence is correct, but
with a few caveats. It has no experience in lending, and financial
inclusion would only mean a collection of deposits that will build up
the liability side of the balance sheet of the new bank. While India
Post is capable of running on sound commercial principles, it may not be
possible to function at an arms- length from its political masters.
Witness the track record of public sector banks that have piled up a
large chunk of nonperforming assets, courtesy political masters. India
Post, like other public sector banks, may not spread formal credit in
rural areas. So, financial inclusion would be incomplete. The government
may infuse required capital, but that would be done only on its terms.
The relationship would only make the business of banking more
vulnerable.
- KV RAO, Bangalore (ET)
- KV RAO, Bangalore (ET)
1 comment:
India Post has, in recent years, taken seriously the idea of infusing professionalism and modern technology into its large banking business (let us accept the fact, though in a restricted way). No one can find fault with them for grabbing the present opportunity to express their wish. Some of the 26 applicants (there could be many who could not make it before the D-day) give a rough idea as to the kind of organisations which are serious about ‘converting’ the ‘money business’ they are already doing, into banking. In some cases, as in the case of India Post, it is not easy to gauge the capacity to do credit business competing with established banks. At least in India, banks have more credibility and now there is a thinking that banking regulation will go into a ‘confusion state’, as some of the applicants would like to get promoted as banks and practically do what they have been doing, to have ‘best of both the worlds’.
Every organisation dealing with money need not be a bank. Organizational structure of banks in India needs a re-look in the context of various pending recommendations on financial sector reforms including those made by FSLRC. Bringing new players even before the rules of the game are settled may add to the confusion.
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