NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, April 21, 2014

The high profile spat between the Reserve Bank of India and the finance ministry over converting India’s loss-making 1.54 lakh post offices under India Post into a bank is likely to be one of the challenging issues that the next government will have to handle.

Top officials said the North Block would prepare a concept note for the next government on the pros and cons of allowing India Post to float a commercial bank. The issue bears directly on financial inclusion, which is a priority of all political parties.

The department of financial services has been put on notice by the RBI that a postal bank has not been ruled out by it despite the finance ministry’s refusal to grant permission to consider the licence application. The RBI has said it may “consider” the application of the postal department for a licence “separately in consultation with the Government of India”.