Dear Comrades,
The Reserve Bank of India's policy initiative for allowing non-banking
finance companies and private players to enter the banking sector has
come at an apt time for the postal department. This is something vast
swathes of the country's rural population may soon have cause to be
grateful for. As matters stand, existing banks have a combined network
of some 87,000 branches, with a little more than a quarter of them in
rural India. Compare this to the 1.55 lakh post offices the postal
department can boast of, already providing various financial services.
More importantly, about 90% of these offices — about 1.4 lakh of them
— are in rural India.
This is a godsend for the government if exploited adequately. The low
level of banking penetration has been a long-running problem, one that
is unlikely to be solved by the entry of new banks. The capital costs of
establishing banking networks
in rural areas as well as the fear of an inadequate customer base are
likely to serve as bottlenecks. The evolution of the postal department
into a banking entity would neatly swerve around these bottlenecks. This
has already worked in countries from Germany to South Africa.
The benefits are obvious. Extending banking facilities to the
hinterlands is an essential prerequisite for equitable development. And
on the other side of the equation, such a move would bring a vast number
of customers — the postal department's small savings schemes have over 250 million takers — into the formal economy in one stroke,
providing more assets to be piped to the markets and loaned to
corporations, catalysing economic activity. Snail mail may be turning
into a thing of the past. But the postal department, if it can exploit
this opportunity, will belong to the future.
Times of India
