Post Bank issue to be placed before Cabinet: Sibal

The ministry of communications and information technology will move the Cabinet to seek approval for funds needed to run banking operations of India Post, in case the Reserve Bank of India (RBI) allots a banking licence to the department.

Sources said the postal department had requested the finance ministry to allot funds of Rs 623 crore to finance the proposed banking debut but that has not been approved yet. Speaking to PTI on the matter, Telecom Minister Kapil Sibal said, "We are just awaiting Reserve Bank of India's decision and then we will go to the Cabinet."

When asked about the possibility of a banking licence in absence of funds, he said, "That issue is yet to come to the Cabinet. In principle, if Reserve Bank of India allows us licence for Post Bank, then it will have to go to the Cabinet because funds are required."

"We will see in the Cabinet what happens?" he added.

The Department of Posts (DoP) lowered its estimate of funds for running banking operations to about Rs 623 crore from earlier projection of about Rs 1,900 crore.

The proposal for Rs 623 crore includes Rs 500 crore as paid-up capital under RBI's new banking licence norms. Another Rs 123 crore is for infrastructure that is needed to comply with the new norms.

The Reserve Bank of India is working on names of shortlisted entities for new banking licences that are yet to be announced. Sources said the telecom ministry had sent the DoP's fund proposal to the Expenditure Finance Committee from where it was sent to Public Investment Board but funds were not approved by the board.

Instead, a finance ministry official asked DoP to become a banking correspondent and help other banks, but the official retracted his stand and issued corrigendum, a source said.