Do large banks suffer from “small customer fatigue”? It seems so, going by the observations of a task force on leveraging the post office network.

There is considerable empirical evidence in this regard as reflected in increasing minimum balance requirements, high transaction charges and barriers for cash handling across bank counters, the panel headed by former Cabinet Secretary TSR Subramanian, said.

Moreover, for cultural, social and historical reasons, large banks find it difficult to motivate their city based employees to work in rural areas, the panel said even as it made a strong pitch for the Department of Posts (also known as India Post) to set up a new bank to achieve the government’s agenda of universal financial inclusion.

Though the Department had, along with 25 others, pitched its hat in the ring to set up banks under the Guidelines on Licensing of New Banks in the Private Sector, the central bank granted “in-principle” approval to only two applicants — IDFC and Bandhan Financial Services, last April.

Despite the central bank and the finance ministry indicating to it that it consider the option of becoming a Payments Bank, the Postal Department is keen on becoming a commercial bank, with special focus on bringing the un-banked and under-banked segments of the population within the ambit of the formal financial system.

Licence

For the DoP to get a banking licence, the Panel highlighted, among others, the reach of India Post, which operates 1,54,882 post offices (with nearly 90 per cent of the network in rural areas), and the post master and postmen being respected local figures, who are not only in daily contact with the villagers but can cross-check and certify KYC (know-your-customer) information.

In this regard, it also referred to the Postal Department’s vast experience in managing small savings schemes and remittance services. The deposit base of DoP at ₹6 lakh crore is next only to India’s largest bank, State Bank of India (₹13,55,475 crore) as at September-end 2014.

Investment

In its quest to become a bank, India Post is investing ₹700 crore for implementing core banking solution (CBS) platform to provide banking, money remittance services and access to diverse financial products across the country with a special focus on the rural population.

By December 2015, all 25,468 departmental Post Offices will be on CBS platform, whereby customers can avail of the convenience of anywhere and anytime banking.

In February 2014, the DoP installed its first ATM in Delhi, followed by three more ATMs in Delhi, Mumbai and Chennai. It proposes to install 2,800 ATMs across the country by end of 2015.

According to the Panel, India Post is expected to establish a fully owned holding company, which in turn will float five subsidiaries, including for banking & financial services and insurance.

comment COMMENT NOW