‘Post Bank of India’: The Next Economic Revolution!

Generations of Indians, more particularly the home birds such as the housewives and senior citizens and expectant students and job seekers, have experienced the Indian post office system as an integral part of their lives. The bright red post box found at every street corner, the humble neighborhood post office, and the energetic post person with his or her cycle have been ubiquitous symbols of tireless public service. The colorful stamps periodically brought out  by the Indian philately system has contributed to remarkable integration across the country. The money order system which was almost the only way to transfer money a few decades ago had an interesting aside; the white message card at the bottom to be torn off and given to the recipient along with the money meant more than the money itself to the recipient. Listening to the shout of the postman announcing “post” or the anticipation of opening the house mail box had been the daily triggers of joyousness, and in some unfortunate cases, occasional pathos too for all individuals. The telegrams were the instant messengers of all news, good and sad.

The post office system was especially empathetic to the indigent rural and poor citizens. It pioneered the savings habit amongst them with very low minimum balance requirements. The advent of superior telecommunications and the surge of national banking as well as emergence of other mailing alternatives have, no doubt, challenged the dominance of the Indian postal system. That said, the Government owned post office system is not to be written off yet. In fact, its core competence of delivering the mail at the door step in every nook and corner with a personal connectivity by the postman with the people and homes he serves is not matched by any other competing service provider. The Indian postal system can reinvent itself and continue the glorious tradition of inimitable and personalized public service by becoming the Post Bank of India, as this blog post argues.      

Infrastructure and services

Even more than the Indian Railways, India Post (previously the Indian Posts and Telegraphs Department),  which falls under the Ministry of Communication and Information Technology amazes any resident or observer of India, for its reach and service. With a network of nearly 155,000 post offices, nearly 90 percent of which serve the rural population (rural population being 70 percent of India’s 1.3 billion population), with an area coverage of one post office for every 22 square kilometers and population coverage of one post office for every 9000 people, India Post has a formidable presence all across the vast country (of 3.287 million square metres). With the telecommunications and Internet revolution, India Post has also kept pace with the introduction of electronic versions of its physical services to an extent. Over time, India Post moved into savings bank operations as well as other financial services.  Today, it has 233 million post office savings account holders and a formidable deposit base of Rs 5.5 billion.

Whatever India Post has done to keep pace with the changing times has been commendable but not transformative, relative to its infrastructure, organization and reach. Time has now come for India Post to plan a paradigm shift in its vision, strategy and structure in terms of its products and services. In every sense, India Post has the ability to touch the lives of every Indian, and also connect every Indian nationally and internationally. With growing population and globalization, and the need for increased connectivity, India Post can leverage its core competence of mailing platform to consolidate itself into a communication hub and ultimately transform itself into a multifaceted economic hub. In this process, India Post can render a host of communication and economic services, with innovative products, that can ensure inclusivity for the vast rural and semi-urban population as well as the indigent sections of the society. This requires a reinforcement of existing services and diversification into new ones. Global communication and national banking would be two of India Post’s principal hubs which it can interleave with a wide range of social, essential and educational services too.

Global communication hub

India Post has in it the historical capability to continue to be the dominant mail agency of India for decades to come. At the same time, India Post has to recognize that it has lost substantial ground to private national and international courier services. India Post has, in the past, underestimated five critical competency levers that are required in a changing millennium. Firstly, it underestimated the growing need for safety and surety in mail and parcel services. Secondly, it underestimated the importance of a collection organization to supplement its delivery organization. Thirdly, it underestimated the need for dedicated transport infrastructure to ensure speed and flexibility in delivery. Fourthly, it underestimated the extent of information technology upgradation that is required to not only trace and track physical mails but also to convert physical mails into more cost-effective and time-effective electronic mails. For example, it never occurred to India Post that like Gmail and Yahoo it could also offer “Indiapost.com” mail service, for example. Fifthly, it never engaged itself with the changing trends of social communication with its own platforms.

All is not lost, however. Each of the above shortfalls can be taken care of with appropriate infrastructural, technological and organizational initiatives. In fact, it can convert the disadvantages into advantages by being ahead of the competitive curve. It can, for example, implement Good Transportation Practices for not only safety and surety for all universal mailing applications but also to enter into newer mailing services customized for multiple industries. It can restructure and refocus its delivery organization to double up as a collection organization as well. With superior transportation support for door to door travel and multiple shifts for personnel India Post can achieve enhanced customer contact. India Post also needs to modernize and diversify its transport fleet and also outsource mail and parcel transportation to achieve overnight delivery. Information technology can be leveraged to develop and offer India’s own multi-language dedicated email service. And, finally from developing applications suitable for the three operating systems of computer, tablet and mobile devices, India Post needs to develop its own operating systems and networking platforms for Indian needs.

Not too many years ago, people wanting to send greetings in India used to rely on the several telegraphic messages of India Post to communicate the wishes. Today, everyone relies on 123Greetings or a similar Internet portal, most of which are structured and executed by Indian software engineers! India Post can resurrect its historical role as a communication hub by providing communication connectivity for all requirements of the Indian population, which is both resident and non-resident in India. India Post can also tie up with appropriate multi-product gifting agents globally to participate actively in the global social networking. With each day of the year being observed as a special day internationally, special messaging and gifting could become a recurrent source of additional business for India Post.

This leads us to the hypothesis that India Post can no longer see itself as an India-centric communication entity. The more India Post globalizes by establishing physical infrastructure in other countries, executing international mail sharing arrangements and setting up global mail delivery objectives, the more effective will India Post will be as a global communication hub. As India Post moves from a business model of being a predominantly physical mail deliverer in India to a business model of globally present Indian communication hub, the organization has a lot to strengthen itself and fulfill its national mission in an international setting.     

National banking hub  

One of the simpler thoughts has been that India Post should diversify itself into banking operations. Given that post office savings schemes have been popular, banking is a logical extension. India’s Finance Minister P Chidambaram has proposed modernization of the country's postal network to make the post offices become part of the core banking solution and offer real time banking services. He has desired that the ubiquitous post office should morph into a neighborhood bank, proving a major boon for villages. The Reserve Bank of India (RBI) has recently formulated certain guidelines, including making all entities with a credible track record eligible for a banking licence. India Post has a strong rural presence and is already into the small savings scheme. It has, by itself, around 155,000 local post offices and around 24,000 district offices against a total of 90,000 bank branches (all banks included).  The new guidelines for setting up private banks issued by the RBI, among other things, makes it mandatory for new banks to open at least 25 per cent of branches in unbanked rural centers. India Post will handsomely win on this score.

India Post is already into various financial services, including small saving schemes, postal insurance, foreign exchange services, money remittance services etc as alluded to earlier. That said, India Post needs to do more than what it has been doing to become a full-fledged bank, competing with the likes of SBI or ICICI Bank. This requires India Post to implement very robust banking systems and Internet based high capacity servers and information technology backbones. India Post also needs to induct top flight banking and information technology professionals into its organization. Government also needs to support India Post with the integration of the post office banks with the direct cash transfer schemes and preferential interest rates for rural based savings and lending schemes. India Post has to evaluate the desirability of spinning off its financial services arm into a full-fledged bank to provide the requisite autonomy and competitiveness to the banking operations while providing access to the available infrastructure.

Compared to the Indian banking services which are still oriented towards the urban and semi-urban clientele in India, the Indian post office system is very well poised to facilitate and promote financial and economic inclusivity to the rural population in India. This, however, can be reinforced and supplemented with providing a range of community and economic services to the population. Each post office can offer an Internet centre which can act as an e-choupal popularized by ITC as an information and commercial exchange platform in the agricultural and aquaculture domains for the rural population and farmers. If ITC could set up 20,000 e-choupals as a private sector initiative and touch the lives of 15 million farmers in 100,000 villages, one may imagine what India Post with its 155,000 post office network all across India can achieve in financial and economic inclusivity, covering the billion rural citizens. In fact, taking advantage of complementary nature of communication and banking, of local production and national/global markets, post office network could even emerge as the new educator of information technology for the vast indigent population of India.

Structure to support strategy

The concept of India Post morphing into Post Bank of India synergizing global communication with national banking is a great strategic value proposition. For the strategy to succeed, structure must support strategy. While continued ownership by, and policy support from, the Central Government is essential, it would be necessary to move India Post from a departmental structure to corporate structure, with requisite empowerment and accountability.  As Alfred Chandler proposed in his landmark book published in 1962, structure must follow strategy. A new strategic direction for India Post to elevate its communication and financial services to an entirely new (and high) trajectory will require several structural inputs such as definition of strategic business units, creation of new organizational structures, induction of new technologies and talents, re-training of current talent base, incorporation of market competitive strategies and processes, and payment of market competitive salaries with services and tariffs that are aligned to benchmarks of social integration and economic inclusion. With an integrated strategy and structure, India Post which is famous for its evocative and colorful stamps, among others, is bound to put an indelible and pervasive stamp of integration and inclusivity on the Indian social and economic canvas.

Posted by Dr CB Rao on May 12, 2013