Hopes of the Department of Posts to launch full-fledged banking operations seem to have hit a roadblock, with the Planning Commission opposing government funding to start the project.
The DoP has moved a Cabinet note for the government to provide Rs 500 crore (Rs 5 billion) as initial capital to India Post towards starting a bank.
According to the Reserve Bank of India’s norms for applying for a new banking licence, an entity needs paid-up capital of at least Rs 500 crore (Rs 5 billion).
Officials said the commission felt providing the Rs 500 crore needed as initial paid-up capital for launching the bank might not be feasible, owing to the tight fiscal conditions.
“Though in principle, the commission does support the proposal, the current weak financial conditions are acting as a hindrance,” said a senior official.
Overall, the department needs about Rs 1,900 crore to run full-fledged banking operations.
Financial help from the government is required, as India Post recorded a deficit of Rs 5,806 crore (Rs 58.06 billion) in 2011-12, 8.5 per cent lower than the Rs 7,899-crore deficit the previous year.
An official said India Post planned to start banking operations across 50 branches.
However, a section within the Planning Commission felt converting a part of post offices into full-fledged