OPINION: Why RBI’s decision on a Post Bank of India is a slap for Finance Ministry
Friday, April 4, 2014
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.