Merger of Regional Rural Banks with Indian Post – According to a plan being discussed in the government, the 14,000 strong branch network of 45 regional rural banks (RRBs) will be brought under the fold of India Post, which itself runs 1.56 lakh post offices in the country.
The Centre will wield control over the proposed bank via a holding company, of which the RRBs, where the Centre already holds 50%, will become subsidiaries. The existing India Post Payments Bank (IPPB)will also be made a subsidiary of the holding company.
Loss-making India Post, having a size and workforce hugely disproportionate to its shrinking role, may reinvent itself by becoming a full-fledged bank. Currently, IPPB, as a payments bank, can’t accept deposits above Rs 1 lakh per customer; also, it can’t lend.
The proposal to make India Post a bank goes with the government’s plan to consolidate PSBs and bring down their number eventually to four or even less. At one point, it may so occur that only the State Bank of India and the proposed India Post Bank will remain in the public sector as two large banks and also be vehicles for assorted government transfers to people. Also, the proposed bank, even while sticking to RBI’s prudential norms, can’t neglect lending to priority sectors like agriculture, MSMEs, education and affordable housing.
Explaining the rationale behind the proposal, official sources said RRBs will bring in a readymade deposit and lending portfolio for the proposed India Post Bank to build on. Once the RRBs are brought under a common management, their efficiency will improve and common practices will be implemented across the networks, they added.
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India Post, which is estimated to have posted its highest-ever loss of Rs 18,255 crore (also highest by any public-sector entity) in FY20. RRBs posted a loss of Rs 548 crore in FY19 compared with a net profit of Rs 1,501 crore in FY18. Outstanding advances of RRBs stood at Rs 2.8 lakh crore as on March 31, 2019, up 11.3% on year. About 91% of their loans were to priority sectors such as agriculture, MSMEs, education and housing.
The government has taken various initiatives for making the RRBs economically viable and sustainable institutions. With a view to enable RRBs to minimize their overhead expenses, optimise the use of technology, enhance the capital base and area of operation and increase their exposure, the Centre has initiated structural consolidation of RRBs in three phases, thereby reducing the number of RRBs from 196 in 2005 to the present 45. During the period, the Centre and other shareholders have infused more than Rs 6,000-crore equity in the RRBs to maintain the mandatory capital to risk weighted assets ratio (CRAR) of 9%.
News in Details : Financial Express
