WHAT ARE THE CHANCES OF INDIA POST BECOMING A BANK?
By Ruma Dubey
It might have been years since your last visit to a Post Office in your neighbourhood? Or rather do you even remember the last time you went to the Post office? In fact we see lesser and lesser of those ubiquitous red boxes around town. Email has made the traditional mail redundant and if the younger generation catches a postman actually walking the street, delivering letters, they think its the perfect photo opp moment for their status update on social networks. Yes, that is how Indian Post has become now; there but not really there. We, living in the metros might have nothing to do with the Indian postal services at all but surely in rural India and smaller towns, post offices still hold sway. And thus it was very heartening to note that the Indian Post has also applied for a banking license. This was an idea which was long in the making and it was just a matter of time before it really did happen.
Indian post, in terms of its reach is formidable - there are 1.55 lakh post offices in the country, of which 1.39 lakh are in rural areas. It has 75,000 branches which is more than all scheduled commercial banks put together. The various savings schemes operated by post office across India have outstanding balances of some Rs 600,000 crore.
India Post is already doing many activities of a bank and giving it that stature will not only help it over its losses but might also give a new meaning to micro financing. As per a report in the Hindu, this decision to include India Post has already been proven in the context of implementation of the Mahatma Gandhi National Rural Employment Guarantee Scheme, where 46.7 million accounts had been opened and wages amounting to over Rs 18,000 crore had been distributed as on October 31 last year. It is also proving useful as the nodal agency for distribution of UIDAI cards. Yes, if the India Post is indeed granted a banking license, it could prove to be the biggest competitor for State Bank of India, in terms of sheer reach and network. Postal services have made inroads into places where there aren’t even roads and power. Thus to have a banking service in such remote places could prove to be revolutionary.
Making use of the postal services for banking is the most logical thing to do. Take the case of Japan. It is extremely successful, not delivering mails but mainly as banks. Most post offices in Japan offer a savings account and it does cover most banking needs including ATMs at a wide range of places including remote villages and mountain towns. Japan Post secures 28% of Japan's household savings and is widely billed as the world's largest bank. It has net assets of roughly 11 trillion yen. And it has drafted a plan to go public, in Oct 2015, expecting to raise $87 billion from two-thirds of its shares to finance reconstruction from the March 2011 disaster.
But there could be a few regulatory glitches for India Post in getting this banking license. RBI, when it floated this bid for the banking license, it stated that it was for the private sector. But the Indian postal department is a part of the communications and information technology ministry and thus not a private sector. To comply with the RBI norm, it would have to first become a corporate entity and only then can it fulfill RBI’s criteria. India Post could then take a few lessons from Deutsche Postbank a German retail bank, which became a corporate entity after it separated from the postal savings division of Deutsche Bundespost in 1990.
RBI has talked about financial inclusion and emphasis is on 25% reach to unbanked rural areas. This might pose a challenge for many private sector companies but not for the postal department.
The only bee in this bonnet could be the lack of adequate staff who would be capable enough to handle banking activities. But then again, it is a huge employment opportunity and if given the right training and if proper infrastructure is put in place, it could become as a big a revolution as the mobile phones in India.
Yes, India Post could become a mulch cow from the current emancipated bone dry cattle it is. The potential is very much there but like all things in India, it only needs to be implemented right.