Postal network to widen reach

JAYANTA ROY CHOWDHURY

PLATFORM FOR POOR

New Delhi, Aug. 28: The government will use the 1.54 lakh post offices across the country as a retail bank to cover poor families under the Jan Dhan financial inclusion scheme.

Last year, the finance ministry had stalled the move to convert post offices under India Post into a bank, despite the RBI supporting the move.

Banks have around 85,000 branches across the country. To service Jan Dhan clients, banks will appoint correspondents called “Bank Mitra” and set up around 77,852 camps, but large swathes of the country will still be uncovered.

To address this problem, the government has decided to use the post office branches. About 40 per cent of Indians, including 51 per cent of farming households, remain unbanked.

Brazil saw more than 10 million bank accounts being opened between 2002 and 2011 after its postal department established Banco Postal in partnership with an existing financial institution.

India has around 150 million postal savings accounts, which are being seen as the potential customers of the Jan Dhan scheme.

The postal department, which has been pushed into oblivion in the last two decades by private courier companies and the spread of Internet, is suffering an annual loss of over Rs 6,000 crore.

However, post office savings schemes and money order windows remain popular. Rural post offices, which account for nearly 90 per cent of the network, cover a large part of the country where bank branches are absent.

“As financial inclusion, which means bringing payment and lending windows to rural India where banks have been hesitant to penetrate, will remain an important objective for any government, the idea of Post Bank remains one, which has to be used effectively,” officials said.

However, leveraging the large physical network of the postal department has its own challenges. Post offices are by nature stodgy bureaucratic monoliths with little understanding of how modern banks function despite handling millions of savings accounts. This was one of the main objections raised by the finance ministry in discussions with the department of posts over its wish to get a banking licence.

Courtesy: The Telegraph, Calcutta