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When you hear 'ATM', what is the first thing that you relate to it? I am sure, many of us, including me, relate it to savings bank ATM card.

How about an ATM card similar to a debit card/ATM card issued by a bank for postal account? Sounds different right?

Yes, the Department of Posts, in an effort to provide enhanced solutions to its customers is all set to launch the first Automated teller Machine (ATM) in Bangalore GPO premises shortly, through a core banking solution.

Last year, the department of post had announced that it has plans to set up 1,000 ATM centres at different post offices across the country, with an aim provide better customer service through IT enablement of business processes and support functions.

Implementing new banking solution enables postal department to offer all kinds of services that are offered by private banks to more than 200 million post office saving bank (POSB) account holders in 1.55 lakh post offices.

When CIOL enquired about the launch of India's first India Post ATM, an official concerned with the Bangalore post office said, on condition of anonymity, that the ATM facility will be launch shortly with good features.

He further added that the postal ATM card enables POSB account holders to withdraw money from any bank ATM, provided they have enough savings.

"POSB account holder need not rely only on Post Office ATMs," he added.

Recently, TCS announced that it had bagged a Rs 1,100 crore, six-year contract from the Department of Posts to provide end-to-end IT modernisation program to equip India Post with modern technologies and systems to enable it to serve more services to more customers, in an effective manner.

The IT modernisation project dubbed 'India Post 2012' will help the department achieve a wider reach among the Indian population through increased customer interaction channels and through new lines of business.


India’s central bank is set to open doors to a set of private and state-run entities in the banking space in Asia’s third largest economy. The objective behind doing this, almost a decade after companies were last allowed to float banks, is the so-called financial inclusion or expansion of banking services in a nation of 1.2 billion people where 40% of the adult population still does not have access to banking. If the Reserve Bank of India (RBI) were to choose one state-run entity to do so, it should be 159-year old India Post. It had 154,822 branches across the country as on 31 March, the latest data available, the largest for any postal department in the world, and close to 90% of them—139,086—are in rural India. This is more than four times the rural branches of Indian banking system. As of June 2012, there are 165 banks in India, including 82 regional rural banks, and collectively they have a branch network of 92,117. Roughly 36% of it, or 33,367, are in rural pockets.

On top of this, India Post has 573,749 letter boxes strewn around the country. Imagine a situation where these letter boxes are doubling up as cheque collection boxes; there will be a dramatic change in the banking landscape in India. Using its network, India Post is capable of doing door-step banking even in remote villages, pushing moneylenders out of business. On an average, a post office serves an area of 21.23km and covers 7,817 people. In contrast, a bank branch serves around 13,000 people.

When it comes to number of accounts, India Post, however, lags behind the banking system. It has some 238 million savings accounts against the banking system’s 810 million accounts but it’s much more than what any bank in India has under its fold. The outstanding balance in all its accounts is little over Rs.6 trillion, more than half of the deposit base of the country’s largest lender, State Bank of India, and more than double of India’s largest private lender ICICI Bank Ltd’s deposit liability. The banking system’s deposit base is around Rs.68.4 trillion.

Apart from mobilizing savings through various schemes, India Post also sells mutual funds and pension products and offers remittance service from 205 countries across the world through 9,751 post offices. It has tied up with Western Union Financial Services Inc. and MoneyGram International Inc. for this. The government also uses post office accounts to route payments to beneficiaries as part of the rural jobs programme and the direct transfer of subsidies. The money raised by India Post goes into the so-called consolidated fund of India. In other words, they are part of the government’s public debt.

With this background, India Post should be the fittest candidate to establish a bank if indeed RBI wants financial inclusion, as no other public or private entity can compete with it in terms of reaching out to the rural masses. It is familiar with the art of deposit taking; has personalized relationships with rural folks who do not yet have access to Internet; and even though it does not directly invest in government bonds, it will not have any problem in fulfilling the statutory requirement of buying government bonds as it has been contributing to the consolidated fund of India. All it needs is to convert part of it into exposure to government bonds. Besides, it also has the infrastructure in place for distribution of financial products.

The argument that can go against it is its Rs.6,346 crore loss in fiscal 2012 as its business dropped, with emails denting people’s letter-writing habit and private courier firms taking away its market share. If it cannot hold on to its own business, how can it run a bank? The main reason behind the loss is not erosion in market share but the heavily subsidized services that it offers in rural India. The subsidy varies between 66.66% in a normal rural pocket and 85% in hilly, tribal and dessert tracts and remote villages. One would imagine that the bank will not be forced to offer subsidized services under the so-called universal service obligation.
If it is allowed to run its banking operations only under commercial considerations, it is bound to succeed with its existing customer base, branch network and reach and expand banking services to every nook and cranny of the country, which no other entity can do.

The biggest asset of India Post is its customer base and branch network, which any bank would have loved to own. Globally, commercial banks always eye the postal department’s network, which comes in handy for reaching out to retail customers. In 2010, Deutsche Bank AG took over the control of Deutsche Postbank AG by raising its stake. Through this, Deutsche Bank added Postbank’s 14 million customers to its 10 million German private clients to become the country’s biggest private sector retail bank. Headquartered in Bonn, Postbank was formed following the restructuring of German postal services in 1990.

As both the RBI and Indian government are keen on financial inclusion, India Post could be a vehicle to do so, provided the government allows it to have a professional management with expertise in banking and skill in technology. If its lack of banking experience comes in the way, India Post should tie up with a corporate entity and jointly seek the banking licence. State-run insurance behemoth Life Insurance Corp. of India (LIC) in 2001 had raised its stake in the Mangalore-based Corporation Bank from 12.26% to 27.02%. By doing so, LIC could start selling its insurance policies through the public sector bank and Corporation Bank started using LIC’s 3,000-odd branch network. India Post could do much more for spreading banking services.
Tamal Bandyopadhyay keeps a close eye on everything banking from his perch as Mint’s deputy managing editor in Mumbai. He is also the author of A Bank for the Buck, a book on HDFC Bank. Email your comments to

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Finance ministry opposes India Post’s banking licence plan

The finance ministry has opposed India Post’s plan to seek a commercial banking licence from the Reserve Bank of India (RBI) on grounds that the postal service doesn’t have the expertise needed in relevant areas, such as handling credit.

India Post is keen to set up a commercial bank called the Post Bank of India, arguing that it can significantly boost financial inclusion in Asia’s third largest economy through its nationwide network of 155,000 post offices.

This will also allow the organization, which posted a loss of Rs.6,346 crore in fiscal 2012, to make up for business dropping off over the years as letter writing dwindled and private courier firms took away market share.

Losses have significantly increased in recent years on account of higher expenses.
However, the finance ministry’s department of financial services doubts India Post’s ability to set up and run a bank, according to a senior postal department official who didn’t want to be named.
Some of the country’s large public sector banks have also been lobbying against the proposal, concerned that India Post, with its vast branch network, could pose a threat to their business, said the official, who’s directly involved with the proposal.

“The larger idea of setting up a bank is to further the cause of financial inclusion. Entry of India Post into banking can significantly help address this situation,” the official said.
However, “They (finance ministry officials) are asking too many questions. Why (do) you need a bank? What is your expertise to run a bank?” the official said.

India Post is engaged in several related functions, such as running a savings bank scheme, selling tax-saving instruments and accepting public provident fund deposits. The government also uses post office accounts to route payments to beneficiaries as part of the rural jobs programme and the direct transfer of subsidies.
A former government official said the postal department should focus on its existing business.

“It is totally illogical for the postal department to enter into banking. They do not have the experience in handling credit or the ability to manage a bank,” said D.K. Mittal, who was finance secretary till recently.
“Mere experience in collecting deposits under the post office scheme is not enough. The department should ideally focus on improving their core activity.”

and try to become profitable instead of diversifying operations.According to Mittal, the department should adopt new technology
Emails to financial services secretary Rajiv Takru last week remained unanswered.
RBI invited applications from private and public sector entities in February to set up banks, three years after former finance minister Pranab Mukherjee made the suggestion and nine years after the last round of licences were issued.

The application deadline expires on 1 July. The minimum capital required by applicants is Rs.500 crore.
Companies that have expressed interest in starting banks include L&T Finance Holdings Ltd, India Infoline Ltd, Religare Enterprises Ltd, Aditya Birla Financial Services Group, Mahindra and Mahindra Financial Services Ltd, LIC Housing Finance Ltd, Bandhan Financial Services Pvt. Ltd, Janalakshmi Financial Services Pvt. Ltd,Tata Capital Ltd, IDFC Ltd, Reliance Capital Ltd, India Infrastructure Finance Co. Ltd, Bajaj Finserv Ltd and Srei Infrastructure Finance Ltd.

Despite the finance ministry’s reservations, India Post is determined to go ahead with its application and has appointed consultancy firm Ernst and Young (E&Y) India to advise it on the plan, officials said.
The department is still in consultation with various ministries on the modalities of setting up a new bank.
While the plan is almost two decades old, the department got serious about it sometime in 2006, conducting internal viability studies and seeking the opinion of consultancy firms.

The move gathered momentum when RBI announced final licensing norms for new banks in February.
According to an interim report submitted by E&Y India in April, the proposed Post Bank of India will focus on the bottom of the pyramid, or the poor, in non-metro centres and avoid urban areas that are already well served by large banks.

“The existing deposit holders under the post office savings bank scheme will have an option to transfer their deposits to the bank if they choose to do so,” said the postal department official cited earlier in the story.
In the initial phase, the Post Bank will have 300-400 branches and a specific number of postal outlets will be managed by each of them.
According to the official, the department of posts plans to introduce an advanced technology platform that will connect all post office branches. It has also studied models of post offices that run banks in Germany and Japan.
E&Y will soon submit its final report to the postal department, said Ashvin Parekh, partner (financial services).
“There have been some concerns raised by the finance ministry regarding the proposal,” he said. “We are in the process of submitting our final report, which will...answer all...concerns.”
Financial inclusion, or ensuring that more of the country’s citizens become part of the banking system, has been a key aim of both the central bank and the Congress-led United Progressive Alliance government for several years. About 40% of India’s population still do not have access to formal financial services.
RBI introduced a three-year financial inclusion programme in April 2010 that saw banks opening outlets in 200,000 villages. RBI has advised banks to draw up a financial inclusion plan for 2013-2016 to further broaden access.

India Post will pitch its vast branch network as an advantage in this direction, although the current state of some of these outposts isn’t likely to inspire much confidence in those looking for a safe place to keep their money.
Out of the total 154,866 post offices, 139,040 are in rural areas. About 6,000 people are covered on average by a post office in rural areas and about 24,000 in urban areas, according to a 2011 estimate by the postal department.

As of 31 March, the outstanding balance under the post office savings scheme stood at Rs.6.05 trillion, which is equivalent to half the deposits of government-owned State Bank of India, the country’s largest commercial bank, and double that of the largest private lender, ICICI Bank Ltd.
E&Y’s Parekh said: “The idea is not to convert the existing post office savings into a bank. The plan is to create a completely new bank. Hence there won’t be any large requirement of capital in the beginning,”
As for the finance ministry’s concerns about lack of credit experience, Parekh said: “This can be built up gradually.”

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On the eve of Akshyay Tritiya (also known as Akha Teej) which is falling this year on 13th May, 2013, India Post has announced a ‘Discount of  7.5 % to all categories of customers on purchase of India Post gold coins of any denominations from the designated Post Offices across the Country.

The Department of Posts has been selling GOLD COINS of 24 carat with 99.99% purity, Branded Internationally Recognized Certification with quality packaging, produced by Valcambi, Switzerland in association with World Gold Council  and Reliance Money Infrastructure Limited with denominations viz. 0.5 g, 1 g, 5 g, 8 g, 10 g, 20 g and 50 g to suit the purchaser/public.


MGNREGS Payments at Post Offices through Electronic Fund Management System(eFMS)

State Governments have entrusted post offices to disburse wages to workers under Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). Such disbursal of wages is done either through worker’s wage accounts or Post Office Savings Bank (POSB) accounts. On receipt of the wage list and funds from the State Government, the post offices credit the amount to the worker’s accounts. Workers withdraw the amount from the accounts at their convenience. 
 Department of Posts has rolled out Electronic Fund Management System (eFMS) in 46 pilot districts of Direct Benefit Transfer (DBT) through post offices enabling electronic credit of wages in worker’s accounts for speedy disbursal of wages to workers. This information was given by Dr. (Smt.) Killi Kruparani, Minister of State for C&IT in a written reply to a question in Lok Sabha today.

 Source : PIB