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Maran urges India Post to float banking arm

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Mr Michael Carter, Country Director, World Bank, flanked by Dr U. Srinivasa Raghavan (left), Member-Operations, Department of Posts, and Mr R. Ganesan, Secretary Posts, at a seminar on `Transformation of India Post for Vision 2020,in the Capital' on Wednesday. - Kamal Narang
Mr Michael Carter, Country Director, World Bank, flanked by Dr U. Srinivasa Raghavan (left), Member-Operations, Department of Posts, and Mr R. Ganesan, Secretary Posts, at a seminar on `Transformation of India Post for Vision 2020,in the Capital' on Wednesday. - Kamal Narang

Our Bureau

New Delhi, June 15

THE Communications and IT Minister, Mr Dayanidhi Maran, said on Wednesday that the Department of Posts (DoP) should expand its financial services business and hive it off in to a standalone bank.

Currently, the postal network offers a number of financial services but passes on the entire money collected to the Finance Ministry for a fixed commission. If the DoP hives off the financial services arm as a full-fledged banking unit, then it will be able to keep the money collected and take investment decisions.

"The department should expand its Finance Mart network to spin-off the Post Bank," Mr Maran said in a written address at the World Bank seminar on the future of India Post. The Minister's address was read out by Mr R. Ganesan, Secretary, DoP.

DoP has launched a number of financial services, including a money transfer facility through a tie-up with Western Union. Financial services have been contributing 45 per cent of the department's revenues and they come as a relief at a time when the postal department is reeling under a budgetary deficit in excess of Rs 1,400 crore.

"India Post should take advantage of the resurgence of mutual funds in the buoyant stock market for selling these financial products, using its vast network in rural and semi-urban areas," Mr Maran said.

DoP is planning to offer services such as bill payment, life and general insurance, mutual funds and government securities under one roof through its Finance Marts. DoP will set up 160 Finance Marts during the year.

The Minister said that the department must move in the next few years to ensure that the deficit in its revenues and expenditure is wiped out in the non-Universal Service Obligation (USO) segments.

The Government has roped in global consultant KPMG to prepare a report on restructuring the postal network in the country.

The mandate given to KPMG includes identifying new areas of business.

KPMG will also review the pricing of postal products and services and the sustainability of loss-making and unpopular products.

The DoP is also looking at the feasibility of sustaining the Government's USO in a competitive market. Currently, the postal network has 40 products and services, many of which, like the mail services, have become obsolete with the availability of faster and more cost-effective modes of communication.

KPMG has been told to assess the postal services in terms of their utility, viability, pricing and to suggest ways to re-engineer the existing products.

(This article was published in the Business Line print edition dated June 16, 2005)
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