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Govt mulls merger of India Post, RRBs into large PSB to cut down losses, improve efficiency

The Centre could in future only keep two big entities - State Bank of India and India Post -- as large public banks

twitter-logoBusinessToday.In | July 27, 2020 | Updated 15:17 IST
Govt mulls merger of India Post, RRBs into large PSB to cut down losses, improve efficiency

The government may merge loss-making entities India Post, along with the regional rural banks (RRBs), into a full-fledged public sector bank to beat down the mounting losses. As per the proposal, which is in early stages, the Centre may control these entities via a holding company. Both RRBs and Post Payments Banks (PPBs) will be subsidiaries of the new entity and both PSBs and states would have the option to monetise or divest their stakes in RRBs.

The reasons the government wants to make India Post, along with regional banks, a unified bank is because it not only goes well with it plan to unify loss-making government entities but also infuse a new lease of life in them, the Financial Express reported.

The Centre could in future only keep two big entities - State Bank of India and India Post -- as large public banks. The inclusion of RRBs will provide readymade cash and vast lending portfolio to the new entity. Their merger into one entity could also boost the overall efficiency.

While India Post recorded highest net loss worth Rs 18,255 crore in FY20, RRBs' loss in FY19 stood at Rs 2.8 lakh crore. RRBs extend over 90 per cent loans to priority sectors like agriculture, MSMEs, housing and education. Their advances as of FY19 stood at Rs 2.8 lakh crore.

Around 90 per cent of the India Post branches cater to the rural sector, while 80 per cent of RRBs also function in the rural areas. India Post has a total workforce of 4.2 lakh employees and 1.56 lakh branches across the country but its finances are crippled by higher pay and allowance costs, which its higher than its total revenue.

Also read: 'Please don't extend loan moratorium': HDFC's Deepak Parekh pleads to RBI Governor Shaktikanta Das

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