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In the laundry list of applicants for new bank licenses, 26 in all, there is a surprise candidate rubbing shoulders with the Tatas, the Birlas and the Ambanis — the Department of Posts. Yes, get that raised brow of yours down, for if the Reserve Bank of India (RBI) approves its application, as well it might, your friendly neighbourhood post office will soon begin to offer banking services.
It is nice to see that India Post has chosen to evolve rather than be consigned to the dustbin of history. In a world where change is the only constant, businesses, as much as people, need to change with the times. Unless if they wish to end up with a ‘Kodak Moment’, that is! The legendary manufacturer of photo films, Eastman Kodak, whose name I first encountered in the title credits of a Hollywood movie as a kid in the eighties, went bankrupt last year. Its mistake? Failing to see the changing picture in the photography business which was going digital.
There are other famous examples of companies that failed to see the evolution in the market and landed in distress. Sony, which was riding the crest of the audio players business with its Walkman and Discman, failed to spot that music was moving to Mp3 from analog and from tapes into the internet. Sony also failed to take one Apple seriously as a competitor. Result: it lost the audio business to competition.
Nokia is another example. Once the second name for a mobile phone, Nokia is now playing a desperate game of catch-up with Samsung and Apple, having missed the smart phone evolution completely.
Why, India Post itself was laid low by the advent of electronic mail at the turn of the century. As email caught on and mobile telephony penetration deepened, people just stopped writing postcards or inland letters. I remember my days as a teenager in the mid-eighties when it was rather romantic to send a nice, long inland letter (yes, not the postcard which could be read by the whole world!) to your girlfriend. These days teenagers text cryptic messages on their mobile phones which, I should say, is rather unromantic. But that’s the subject for another blog.
The phase-out of telegrams from July 15 is another warning signal to India Post. It is only a question of time, a few more years, before physical letters and the ubiquitous post boxes, which I used to gaze at in wonderment as a kid, disappear. The other day, I roamed in vain around my locality for a stand-alone letter-box to show to my eight-year old. Ultimately, I had to take her to the post office to show the little red wonder that I used to stare at as a kid in every other street corner.
The point is that India Post has realised that it has to find other sources of revenue. In fact, it diversified into distributing mutual fund products more than a decade ago. Last month it announced plans to set up mechanized warehouses and a tie-up with Air India to transport parcels for ecommerce portals.
The decision to foray into commercial banking now is only an extension of its presence in financial services through the post office savings bank which is used by millions across the country. Apart from offering savings schemes with attractive interest rates, post office savings bank accounts can be used normally like any other bank account.
The name of the game in banking is an extensive branch network. And India Post is unbeatable in this with over 1.55 lakh post offices across the country, 90 per cent of them in rural areas. How many retail banks in the country can boast of such a network? The bank with the biggest network in India, SBI, has 14,816 branches; together with its associate banks the number will not exceed 20,000. Even if India Post were to convert just 10 per cent of its branches into banks, it will be larger than SBI.
And again, India Post is present in every district of the country unlike SBI or any other public sector bank. So, if the objective of issuing new bank licenses is improving financial inclusion as the government claims, then India Post should really be a frontrunner for a license. Given that it is a government department, the RBI should really not have any problems with the financial soundness of India Post.
People, especially in the rural areas, are already familiar with India Post; they may even be banking with it already. So winning credibility is not an issue unlike some of the other big names who are now jostling for a license.
All that would remain then is getting the right people on board to run a bank, putting it at arm’s length from the government and getting it well-capitalised. And lo and behold, we can have those little red contraptions back on street corners; only that this time you can swipe your cards there for cash rather than drop a secret inland letter to your girlfriend! I don’t know if India Post will get a license or when it will open its first bank branch, but it already has its first client: me!
