Postscript
For A dak bank...
- It has a large rural network of 1,39,040
village post offices
- Has accepted deposits for decades—Rs
6.18 lakh crore in 2011
- Has established the trust of people,
thanks to government backing
- South Africa and Japan have run successful
post office banks
- Modest rollout plans, claims it’ll hire
the best professional managers
...And Against It
- The post office has never managed the
deposits it collects; FinMin does.
- The existing employees will resent
outsiders—potential culture clash
- New construction etc needed to make post
offices bank-ready
- Rural postal network manned by 1 lakh
underpaid non-regular staffers
- Could face recovery issues, given the
perception it’s an arm of government
***
Jawaharlal Saha is one of India’s 40,000 postmen. Every day, he
cycles with a payload of letters through the Mandi House area, in the bustling
centre of Delhi. “On some days, the mail weighs 40 kilos. I might cycle around
for say, five hours, and make repeat visits for Speedpost deliveries,” Saha says.
Like other postmen, he sorts some mail, hawks insurance, sells stamps and pitches
for the PO’s savings bank—tasks, he says, city postmen rarely have time for.
Saha’s busy schedule is not exceptional. Over the past
decade, the postal service has delivered lesser and lesser mail. It
delivered 1,400 crore postcards, letters, newspapers, parcels and packets in
2001. This dropped to 660 crore in 2011, as private couriers captured the
field. Simultaneously, the post office’s workforce dipped 30 per cent, from
over 6 lakh to under 5 lakh. Its losses are roughly Rs 6,000 crore.
“We have really worked on our proposal, and we are hoping to get
in-principle cabinet clearance for it. But I can’t say when.”Kapil Sibal, Union Communications Minister
That’s why, about a fortnight ago, the department of posts
delivered its biggest package ever—a proposal to raise a bank, which is now
under the Union cabinet’s consideration. Along with 25 corporate heavyweights,
financial institutions and brokerage firms, the department of posts has thrown
in its weight—and, many say, its fate. Backed by Union communications minister
Kapil Sibal, this is part of the government’s three-pronged strategy: a
government-run postal system to ‘regulate’ the sector; a
public-private-partnership (PPP) model to develop its vacant land; and,
crucially, the post office bank.
Six years ago, the department had suggested its transformation
into a bank, but that wasn’t cleared by the Reserve Bank of India. At the time,
India was not looking to approve new banks. This time around, there’s been a
warm reception, with newspaper editorials giving the proposal a thumbs-up,
citing its national reach and emotional connect with the people. But is that
sufficient to make for a viable bank?
“The proposal is a very well-planned-out effort,” says Ashvin
Parekh, partner and national leader, financial services, Ernst & Young. The
global consulting firm was appointed by the postal department five years ago to
suggest a revival plan. It suggested the setting up of a new company, the ‘Post
Bank of India’. “Postal services are shrinking and finding it very difficult to
fund their work, and face private sector competition. They have, however,
achieved efficiency in small savings, which the proposal hopes to leverage,” he
says.
“Postal services find it hard to fund their work. But they are
efficient with small savings, and the proposal leverages this.”Ashvin Parekh, Partner, Ernst & Young
Here’s the logic: all but 176 of India’s 1,54,866 post offices
already provided financial services in 2011, and they have a great deal of
trust-winning emotional appeal. For its various savings bank and certificate
schemes, the postal department had a balance of Rs 6.2 lakh-crore in 2011, up
from Rs 5.6 lakh-crore in 2007. “The popularity of financial products such as
PPF and postal savings does not seem to have waned,” says S. Madhavan, a
Delhi-based consultant, until recently a senior partner with PwC.
So far, post offices take deposits and hand over receipts. End
of story. The finance ministry uses this money to fund the deficit or other
projects. If the Post Bank of India is approved, post offices will start
handing out loans, not just postcards. “There is no negative for investors if
the post office opens a bank. They will benefit from streamlining,” says
Calcutta-based financial planner Brijesh Dalmia. As a bank, the post office
will have to follow KYC norms and conduct due diligence even on rural sources
of funds.
There are precedents: South Africa has a post office bank, Japan
has one. “Are there global examples of postal services becoming banks
successfully? Yes. Is the task easy? No. In between these lies the truth,” says
Neeraj Aggarwal, a partner with Boston Consulting Group. He says the
department’s wide reach and the fact that it has historically accepted deposits
are its assets.
“The banking plan is in line with the idea of privatising the
postal deparment, an essential service, through the PPP model.”D. Raja, CPI MP
That said, it’s a long trek. “The rollout plans are,
accordingly, modest,” says Parekh. Initially, no more than 50 to 200 post
offices will become banks every year. So, for most Indians, the post office
next door—there is one within 2.6 km of everyone—won’t transform overnight.
Besides, only 24,100 post offices were computerised by 2011. “Core banking”, in
which deposits show up on the ledgers instantly, is still a work in progress.
To be an effective asset manager, says N. Srinivasan, a
Pune-based consultant who has worked with nabard and RBI, the post office will
have to learn how to invest money, give loans to factories and village folk. It
will also face an onerous task: collections. “Setting up a bank will prove a
challenge. Today, people feel postal deposits are government deposits. Will
this perception last when it becomes a bank? It’s to be seen,” he says.
The department will need Rs 500 crore to capitalise the bank,
and as much more to hire staff (they propose bringing in a management team from
the private sector), upgrade technology and train people. As 40 per cent of
urban and 60 per cent of rural Indians are “unbanked”, clients are expected to
line up.
Given the enormous hold of the post, there are detractors, of
course. CPI MP D. Raja says the banking plan basically ties in with the
department’s effort to privatise this essential service. “The land and building
development of postal department and all its services are being given a PPP
push. In fact, this is an essential service and the government should see it in
that light,” he says.
What could be equally troubling is that 89 per cent of the post
offices’ mail delivery is handled by gramin dak sevaks, an agitated lot who are
demanding pensions and salaries on par with postmen. Over 1 lakh post offices
are “extra-departmental”—that is, the dak sevaks own the premises and get a
pittance, if at all, as rent. S.S. Mahadevaiah, general secretary, All-India
Postal Extra-Departmental Employees Union, says, “The department doesn’t have
bank management experience, so it will hire outsiders. Recovery will be handed
to us. If these E-D post offices become banks, the rent of Rs 100 (paid only to
some) amounts to nothing.”
Like Saha, the dak sevaks regularly multi-task, collecting
price-related information, managing NREGA accounts, hawking financial
products and so on, usually getting a small “incentive” payment. In this
way, the postman himself has been reinvented. The Union ministry of statistics
and programme implementation had roped in dak sevaks to collect commodity
prices in 2010. “After initial glitches, the data flow has been smooth and
useful for us,” says T.C.A. Anant, secretary in the ministry and India’s chief
statistician.
Post office employees hope they will be part of the big new
banking plans. So far, there are murmurs of training and rollout of handheld
devices. Clearly, the bank won’t replace the post office just yet. But change
is in the mail.
By Pragya Singh : Source : http://www.outlookindia.com/article.aspx?286999
