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Friday, January 31, 2014

Postal banks effective globally: Nachiket Mor

, head of the Reserve Bank of India ()’s committee on , on Thursday said the postal bank model had been a success globally. In a report by the committee, Mor had advocated differentiated banks and a new structure for priority sector lending


A former deputy managing director of , Mor is also a member of an advisory committee under former RBI governor  that is vetting the applications of 25 applicants for bank licences. The committee has been mandated to communicate its suggestions to the banking regulator.

While  has applied for a , there are differences within the government on whether the entity should be allowed to enter the sector. While the communications and information technology ministry is pushing the idea, the finance ministry is opposed to the move.

“I don’t want to comment anything about India Post. What I am saying is worldwide,  have been very effective as payment banks,” Mor said at the sidelines of a seminar of financial inclusion.

The finance ministry is not keen on letting India Post convert itself into a bank, citing practical difficulties. This is despite the fact that about 90 per cent of its 155,000 post offices are located in villages. As of March 2013, postal savings stood at Rs 6.05 lakh crore, half the total deposits of , India’s largest lender.

Last week, Minister for Communications & Information Technology Kapil Sibal said his ministry would ensure India Post got a banking licence.

The Mor panel has recommended setting up two kind of banks — payment banks and wholesale ones. It emphasises the need to move away from the universal banking model in which a bank offers all financial products and services and has to meet all regulatory mandates and priority sector obligations to specialised banks in a differentiated bank licence framework.

“We need to be lot more flexible and not frown on collaborations. Let the regulator be a referee, and not a captain,” Mor said.

Several experts and industry players feel financial sector regulations are stiff, with high entry barriers, particularly for banking. While giving bank licences, RBI follows a conservative approach. For about a decade, no new players have been allowed into the sector.


In 2010, following a Budget announcement by former finance minister  in this regard, a process to allow new banks into the sector was started. But four years since the announcement, bank aspirants are yet to be secure approval. Raghuram Rajan, who took charge as RBI chief in September 2013, has, however, expedited the process and is likely to announce the entry of new banks in the next few months.

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