The Hindu Business Line : Post offices give swanky banks a run for their money

"Our savings bank and postal deposits have continued to surge, well into the present decade," the Post Master of Ernakulam Post Office said. And it has been a steady and consistent growth in post office deposits, fit to rival the best performers in the banking industry.

Postal deposits, which stood at Rs 44,332 crore in April 2002 grew steadily to Rs 55,841 crore in April 2003, and then surged to Rs 71,387 crore in March 2004. And, monthly income scheme (MIS) has been the bestseller among all the post office deposit instruments.

"As interest rates from commercial banks plunged, MIS with its handsome 8 per cent returns proved to be a major draw even for a large number of bankers who retired with large chunks of funds from VRS scheme, but were seeking a steady stream of monthly income," an official in charge of the post office savings scheme said.

There was just one catch: the maximum amount that a joint MIS account could hold was Rs 6 lakh. But with no tax deducted at source and promise of an income of Rs 4,000 per month, there has been no dearth of takers for the scheme. That was not all.

"With a bonus of 10 per cent on the capital after six years' maturity, the effective returns would be close to a lucrative 10 per cent per annum — far above normal bank rates," sources in the Postal Department said.

Small wonder that post office agents, who earn a commission of 1 per cent on MIS accounts canvassed, have very little to complain.

Reflecting this resurgent mood in the post offices, Ms Priya Rajan, a commission agent at the post office, said: "The response to the senior citizens scheme has been even more rewarding." The scheme, which was started in very select post offices in the country in August, has a tenure of five years and commands an interest rate of 9 per cent.

During August, two post offices in Kochi - Edappally and Ernakulam Head Post office - were in a position to amass Rs 5.23 crore from the scheme against Rs 15.17 crore from MIS. "The performance of the month-old senior citizens scheme, which has now been extended to all departmental post offices, has been quite remarkable," sources in the Department said.

The distinctive edge of the new scheme has been the revised upper limit of Rs 15 crore per account. This is bound to bring in far more resources, since several VRS customers had wanted to invest much beyond the Rs 3 lakh individual or Rs 6 lakh joint account limits, the sources said.

"With interest rates bottoming out and tax threats still writ large over NRI deposits, there is a distinct possibility of several of them diverting a portion of their savings into the post offices, as senior citizens accounts in the names of their parents," a worried banker said.

While bankers are perturbed about their liabilities, the Priya Rajans are earnestly pursuing their new pot of gold - 0.5 per cent commission on all senior citizens accounts canvassed by them.

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