New Delhi: Government is mulling to take the proposed Post Bank of India public or gradually increase public participation to raise funds after converting the vast post office network into a commercial bank.
In a meeting chaired by Prime Minister Narendra Modi last month on the findings of the Task Force on India Post, Department of Posts (DoP) conveyed its intentions to enter the banking space targeting rural India, sources said.
The department gave the justification that India Post, at present, undertakes all banking operations, including payments and has longer direct experience of banking operations as well as handling money issues.
Only the extension of credit is not a part of its current portfolio, the source added.
A government official said: "DoP said that once the bank is established and banking operations are running, the entity has the potential to go public or public participation can be increased gradually to raise funds."
Investors would be interested in the bank considering its huge access in rural India, an area still out of reach from other private and state-run banks, the official added.
Post office has 1,40,000 rural branches, while all other banks put together have about 35,000 rural banks most of which are not in rural panchayat towns.
According to the department, it has more than 100 years of experience in handling finance and monetary issues, especially in rural areas, the official said.
"Besides, India Post has fully established 1.5 lakh business correspondents (BCs) with branch offices deployment and every post branch and postman has full local knowledge of his area, in short, he is a walking KYC Know Your Customer)," the official added.
India Post Task Force in its report to the Prime Minister has also suggested a similar route. The report says the bank should start with full government control and with an initial capital injection of Rs 500 crore, the official added.
Modi had set up the Task Force in 2014 to leverage the postal network in India and to enhance the role of India Post in financial inclusion, among other services like delivery of goods for eCommerce firms.
The report suggested that the government should set up a holding company under the Department of Posts for immediate roll out of banking, insurance and e-commerce services by the 1.55 lakh strong postal network.
The panel suggested establishing Post Bank of India as a separate entity with a branch in each district in the first three years with initial capital of Rs 500 crore to be funded by the government.
Post Bank of India and Prime Minister's Jan Dhan Yojana can complement each other for financial inclusion, former Cabinet Secretary TSR Subramanian, who headed the task force, had said.