New Delhi:  Kapil Sibal’s vision of granting banking licenses to postal department seems to be a tough endeavour. The recent talks between the Finance ministry and the RBI indicate towards their unwillingness to do so.

According to sources of the Finance ministry nothing has been finalized in this regard but there seems to be many roadblocks in granting licenses to the postal department.

The Finance Ministry has expressed concerns over giving bank licenses to the postal department as the far flung reach of post offices in rural areas will adversely affect those public sector banks that have begun to expand there. The Ministry also doubts that the postal department will be able to compete in the modern banking system.

There is high competition between public and private players in the banking sector which is likely to increase further. Therefore to enable the public sector banks to withstand the competition, government provides huge funds to these banks annually. Given its conventional ways of operating, it’s unlikely that post office banks could survive for long.

Meanwhile, the Union Minister of communications and IT, Kapil Sibal seems to be least bothered about the performance of the post office banks if granted licenses. Sibal again wrote a letter to the Finance Minister, Pranab Mukherjee, to speed up the process. The Indian Postal Department has also applied to the Reserve Bank of India for a banking license saying that with 1.55 lakh post offices and 25 crore saving accounts, it truly deserves a banking license.

The total number of Post offices in India is more than the number of independent branches of the public sector banks. The Indian postal department had proposed to work like an extensive banking system last year.