Vandita Kaul, Secretary (Posts), has appealed to the Reserve Bank of India (RBI) and the Ministry of Finance (FinMin) to consider the proposal. She argues that a modest capital infusion of ₹200 crore could set the stage for the transition.
Payment banks are restricted from lending as per the RBI’s regulatory framework. According to Kaul, “We definitely need to move into actual credit disbursal. The only way forward for India Post Payments Bank is to become India Post Small Finance Bank.” Kaul says IPPB’s existing infrastructure—with over 70% of its branches in rural areas—already aligns with the objectives of small finance banks.
The transition, however, is not straightforward. The RBI has been cautious about granting new SFB licenses, given that 11 such banks are already operational. Furthermore, of the six payments banks in India, only three—including IPPB—are truly active.
However, Kaul has suggested interim steps to navigate the regulatory path.
1. Expanding Institutional Accounts: Currently, IPPB’s partnership with the Post Office Savings Bank (POSB) allows for a sweep-in, sweep-out facility—but only for individual savings accounts. Allowing institutional accounts and term deposits could provide a bridge until full-fledged SFB status is granted.
2. Ring-Fencing Small Entities: IPPB could be allowed to offer specialised deposit products for self-help groups (SHGs) and micro-entrepreneurs, ensuring they get access to better financial services while the bank transitions.
While IPPB has put forth its case, the decision continues to rest with the banking sector regulator, the RBI.
(Edited by : Ajay Vaishnav)
