New Delhi, Mar 5 (KNN) India Post Payments Bank (IPPB) has reiterated its appeal to convert into a Small Finance Bank (SFB), citing its extensive rural network and digital-first strategy as key enablers for bridging the credit gap for small businesses, farmers, and self-help groups (SHGs).
Vandita Kaul, Secretary (Posts), has urged the Reserve Bank of India (RBI) and the Ministry of Finance (FinMin) to approve the transition, emphasising that a capital infusion of just Rs 200 crore could facilitate the shift.
Currently, payment banks, including IPPB, are prohibited fr0m lending under RBI regulations. Kaul stressed the necessity of expanding IPPB’s role, stating, “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.” With over 70 per cent of its branches in rural areas, IPPB’s infrastructure is already aligned with SFB objectives.
However, the transition faces regulatory challenges. The RBI has been cautious about granting new SFB licenses, with 11 such banks already operational. Of the six payments banks in India, only three, including IPPB, remain actively engaged in operations.
To navigate these regulatory hurdles, Kaul has proposed interim measures. One such measure is expanding institutional accounts. IPPB currently offers a sweep-in, sweep-out facility for individual accounts in partnership with the Post Office Savings Bank (POSB).
Extending this feature to institutional accounts and term deposits could serve as a temporary solution while awaiting SFB approval.
Another suggested measure is ring-fencing small entities. IPPB could be permitted to introduce specialized deposit products for SHGs and micro-entrepreneurs, enhancing financial access for these groups during the transition.
While IPPB has presented a strong case, the final decision remains with the RBI, which will weigh the regulatory and financial implications before granting approval.
(KNN Bureau)
