By Ruma Dubey

When was the last time you actually went to the neighborhood post office?  Or rather, have you written a letter (not email) and actually ‘posted’ it as in sealed it in an envelope, wrote the address, stuck a stamp and actually put it in the red mail box?  With Diwali round the corner, you might actually now see more of your postman but otherwise, one wonders if the postman has enough letters to deliver?

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. 

Thus the biggest news to cheer when the RBI yesterday released 11 names eligible to set up payment banks, was the inclusion of Indian Post. This mammoth organization, with reach into the remotest corner of the country is the best unit suited for financial inclusion all through rural India.

What is a Payment Bank? This is a niche banking activity where the selected 11 are authorised to collect deposits (initially up to Rs 1 lakh per individual), offer Internet banking, facilitate money transfers and sell insurance and mutual funds. The objectives of setting up of payments banks is to ensure further financial inclusion by providing small savings accounts and payments/remittance services to migrant labour workforce, low income households, small businesses, other unorganised sector entities and other users.

Isn’t the Indian Post already doing most of these services? India Post is already doing many activities of a bank and giving it that stature will probably help it overcome its losses and will give a new meaning to micro financing.  As per a report in the Hindu, this decision to include India Post had 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. It has also proved its utility as the nodal agency for distribution of UIDAI cards.

Thus it is fantastic news to know that its services as a niche banking unit is finally being recognized. Instead of having allowed it to die a natural death, which is what would have happened but for these other services, it is great that the RBI has capitalized on the reach of this Govt unit. 

So that brings forth the thought – why can’t our Indian postal services be made more efficient and eventually an IPO?  While the Govt is divesting stake in other PSUs, why not in this huge organization, given its new stature and huge land bank? The 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. 

And IPO will have to be the way forward to modernize the post offices. And Indian Post will not be the first to go for an IPO. 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 $11 billion from two-thirds of its shares to finance reconstruction from the March 2011 disaster.

October will also see an IPO from Italian Post where the Govt plans to divest 40% stake. It hopes to raise as much as 4 billion euros ($4.42 billion) from the deal. Royal Mail of Britain is already listed where the UK Govt divested 70% of its stake.

For Indian Post, as it moves ahead as a bank, 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.

India Post becoming a bank means it could become larger than SBI, at least in terms of reach. And if nurtured well, it could indeed become humungous. Once it turns around, the Indian Post should seriously think of divesting stake!