India Post aims to set up a 100% subsidiary company by this year end to operate a payments bank.
Payments banks are institutions that will offer most of the banking services except loans and credit card products to retail customers. The Reserve Bank of India last month granted licence for payments banks to 11 applicants, including the department of posts.
Communications minister Ravi Shankar Prasad on Monday held a review meeting with officials of the department of posts and asked them to prepare a draft note for the Cabinet to set up the new company.
Setting up a subsidiary is mandatory as India Post is a lender to the government, and hence cannot lend money to others. The minister’s active involvement reflects the government’s keenness to give the department a headstart on firms such as Paytm, which will join the fray in March 2016. India Post plans to launch payment bank services by 2016-17.
Last December, a task force on leveraging the post office network had suggested setting up of three subsidiaries under the postal department and the communication ministry for extending services in banking, insurance and e-commerce.
Prasad told the officials that as banking and financial services are not available in most of the over 600,000 villages, India Posts’ payment bank would help in financial inclusion of the rural poor. He also hoped over 500,000 new jobs would be created over three to five years, with special focus on rural and tribal women.