If all goes well, the postman will turn banker

The venerable postal department may soon go beyond delivering posts and parcels. It could have its own bank, for instance.

India Post is in the process of appointing a consultant to conduct a feasibility study on setting up the Post Bank of India, A S Prasad, deputy director general - financial services, said.

The department has got response from eight entities to its request for proposal.

“We are examining the request for proposals that we had sent to various management institutes. We should be able to finalise the responses in a couple of months, following which we may send it to the government,” Prasad said.

“We had approached the government a couple of years back to start a bank. The government asked us to give them a plan. Once we start the Post Bank of India, it will be a big bang. By March 31, 2012, we should either be a bank or not be a bank,” Prasad said.

With its reach, India Post can give competition to even the biggest in the business. It has over 155,000 offices spread across the country compared with 12,500 branches of State Bank of India, the country’s biggest bank.

Financial services are not new to India Post. The organisation, over 200 years old, has been extending financial services for about 100 years now. As part of its regular operations, it provides financial products such as insurance, money transfers and time deposits.

Asked about the competition such an initiative may face, Prasad pointed to the rich history of banking the department already has.
“We have been handling liabilities for ages, but we may have to think of the organisational structure and how it will have to be manned, as a Post Bank of India would require a brand new structure,” he said.

A public listing may be “too early” to talk about, Prasad said.
He also ruled out acquisition of an existing player. The Post Bank of India will be “a greenfield bank,” he said.

The postal department plans to bring the existing nodal points
under its core banking solutions net, Prasad said.

“By October-November, 104 post offices will be brought under core banking on a pilot basis. If this is successful, then we will implement our first phase of bringing 4,000 branches under core banking by March, 2012,” he said.

India Post has appointed Accenture as consultant for its core banking programme.

Revenues from India Post’s financial services are expected to contribute about 50% to postal department’s earnings in 2009-10 (April-March), slightly higher than 46% a year ago.

“This year, revenue from financial services has been good. Usually we have an annual growth of 10-15%, but we expect growth to be about 15-17%,” Prasad said.

Some of the products offered by the postal department are Public Provident Fund, National Savings Certificate, Kisan Vikas Patra, savings bank account, monthly income scheme, recurring deposit accountand post office time deposits.