An Indian Civilizational Perspective

Postal Bank of India: Indian Post goes for a Makeover!

Remember the ubiquitous Post Office in India? Where the postman is found even in the remotest village on his bicycle peddling letters to every nook and corner of India? Well, that same Post department despite its inefficiencies is ready for a make over! It now wants to start a bank! Not that it is totally new for them.. we do have Postal Savings Schemes where people invest and get some good returns. The only problem is the hassle in all of that due to rampant corruption. I do remember you actually had to pay the clerk to get your OWN money back!!! My experience of the normal Indian banks is to bad that it would require a lot of persuading to even go near the Postal Bank of India!!

However we cannot discount the massive reach of the postal department. If only someone could use it well… maybe start a quazi-government department which is autonomous and can continue with the loss making enterprise of sending letters but also somehow weave in the profit making activities like the Post department in Italy did – of selling Vacuums to villagers etc.. But if it is done by the same set of babus.. well all I can say is that the Postal Babus and officers are in for a HUGE Diwali bonus this year!!

In a dramatic attempt to wipe out the Rs 1,000 crore deficit that India Post currently runs, it has started work to set up a bank. Tentatively called the Post Bank of India, sources say it will start operating with 30 branches towards the end of this year – next year on the outside.

During the course of the 11th five year plan, the idea is to open 1,500 branches across the country. In many ways, the move mirrors a transformation that was engineered by the Italian postal service. After years of mounting losses broke its back, Poste Italiana started using its network to run everything, from a bank to selling vacuum cleaners. The gamble paid off and CEO Massimo Sarmi is now spoken of in revered tones. But for India Post, the proposal is at a preliminary stage. ”

It will require lots of permissions starting with the Postal Services Board, RBI, the finance ministry and the cabinet before operations begin,” says Jyotsna Diesh, chairman, Postal Services Board . But sources close to the development say postal department is proposing a capital investment of Rs 1,000 crore for the bank.

It will be set up as a subsidiary with the postal department holding a 51% stake in it. It also intends to rope in major public sector banks like the State Bank of India to pick up a 25% stake in the new venture . Of the remaining equity, 5% will be offered to employees of India Post and the rest will be offered to the public. For the department, the idea isn’t entirely new.

In fact, it has been toying with the proposal for a while now as part of a series of initiatives to wipe out its deficit. This includes setting up postal finance marts that will sell various finance and insurance products to its customers. With a network of over 1.55 lakh post offices, the department already provides various financial services including a post office savings bank (POSB), postal life insurance, pension payments and money transfer services.

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