-page-0.jpg)
WHY INDIA POST SHOULD GET A BANKING LICENCE
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
bankerstrust@livemint.com
Source :
http://www.livemint.com/Opinion/za54bsB4xIk9En0XPCiKOJ/Why-India-Post-should-get-a-banking-licence.html
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.”
Source :
http://www.livemint.com/Politics/lLLBYN3n5qQBxgg8bjjlRK/Finance-ministry-opposes-India-Posts-banking-licence-plan.html
INDIA POST ANNOUNCES 7.5% DISCOUNT ON GOLD COINS FOR AKSHYAY TRITIYA
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.
Source:-PIB
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.
Subscribe to:
Posts (Atom)