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Indian post offices to turn into financial supermarkets

Fakir Chand in Bangalore

Shedding its traditional and conservative image, the Indian postal services, with the largest network in the country, is gearing up to turn into a behemoth of financial services and products sector in the near future.

Though post offices across the country will continue to provide basic services that have been their main stay with cross-subsidised products for the common man, competition from banks and other financial intermediaries has forced the government-owned postal department to expand its portfolio of services to offer a wide range of financial products for resource mobilisation.

"A high-power committee headed by B N Som of the Indian Postal Department will be submitting a report to the Union finance ministry next week with sweeping recommendations for launching a host of financial products, including ATMs, smart cards, foreign exchange transactions and insurance policies through select post offices across the country," said Vinod Dhamija, deputy director-general of Indian Postal Services said in Bangalore on Monday.

In the run-up to converting general or head post offices in select cities across the country into financial supermarkets, the Indian Posts have entered into a strategic partnership with the State Bank of India Mutual Fund to distribute the bank's various mutual funds from select post offices in Bangalore, Bombay, Chandigarh, Delhi, and Madras.

After having successfully launched a similar alliance with IDBI-Principal early this year, from a few cities, to offer its mutual fund schemes, the Indian Posts will be tying up with ICICI next week to promote its mutual funds through select post offices in the country.

Admitting that revenue mobilisation from traditional services as sale of stamps, money orders, and postal deliveries have been on the decline, thanks to the growing expansion of courier services, the Internet, and phone calls becoming cheaper after the subscriber trunk dialing had been extended up to 200km early this year, Dhamija told rediff.com that Indian postal department would leverage its vast network in the country to extend its services from mere postal savings and time and fixed deposits to value added services.

"The Indian postal services are available from over 150,000 branches through the length and breadth of the country, perhaps the largest network in the world. We intend to leverage this awesome infrastructure with the expertise we are acquiring to broaden our services so that even a common man will have access to the benefits of various financial schemes and products that are available through non-government organisations like banks and non-banking financial companies, including financial institutions," Dhamija said.

Incidentally, the postal department is also drawing an ambitious project to network its general or head post offices with the assistance of its sister concern, the department of telecommunications, to computerise its range of public services and make them available online from anywhere and to any customer spread across the country. As on date, over 1,250 post offices in various parts of the country have a dedicated VSAT network via satellite link.

"In a free-market economy, competition from private players for a share of the huge savings pie is catching up fast with the Indian Posts. With interest rates on time and fixed deposits falling periodically, we have to find avenues to halt our valued and loyal customers moving away from their friendly-neighbourhood post offices to the new players on the block," Dhamija affirmed.

Giving nationalised banks like SBI a run for their money, the Indian Posts are also planning to expand the facility to offer the Public Provident Fund scheme beyond head post offices to sub-post offices across the country.

According to Indian Postal Services Board member Aparna Mohile, the postal department is having a deficit of Rs 16 billion at the end of fiscal year 2000-01. "Since the budgetary support from the finance ministry is only to the extent of 66.6 per cent of the subsidised services offered to the public, the department is turning post offices into a one-stop financial services place to raise not only the much-needed resources, but also provide value-added services to the common man, who frequents the post office," she added.

In a bid to give a corporate touch to the lacklustre services provided by post offices generally, the department is under taking a massive re-orientation and re-engineering programs to train its thousands of officers for providing efficient and quality services to the common man.

Announcing the partnership, SBIMF managing director Niamatullah said customers of the post office would be able to pick and choose their investment portfolios with the help of their friendly neighbourhood post office. "With the largest retail bank in the country and collections to the tune of Rs 1,820 billion through savings and other deposit schemes, the vast Indian postal network offers the best bet for our attractive mutual fund schemes to reach the largest number of customers in the country," he added.

SBIMF will be paying a fee or commission ranging between 0.9-1.75 per cent to the Indian Posts depending on the mutual fund scheme and the volume of sales. As the MF schemes provide 10 per cent tax-free interest on dividend and its units can be purchased with limit, they provide an alternative avenue for savings.

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