India Post - a key financial inclusion component?
An inter-ministerial committee on financial inclusion has recommended structural changes in the operation of postal savings bank accounts ( POSB) . The focus is on using the postal service as an important channel of financial inclusion. India Post has 155000 branches, twice as big as the outreach of all the commercial banks in India. Even currently, Post Office Savings Bank contributes 45% of the revenues of Indian Post. The key focus of the report has been to examine potential synergies between the efforts at broadbased banking and financial services delivery at India Post and the larger policy goal of financial inclusion. One of the key take-away from the report has been that the role of postal service is huge in the goal of achieving universal financial inclusion. Another key suggestion has been to evolve India Post as a P2P payment system. This is done with an eye on the huge Government to Person payments which can be routed through India Post. Key recommendations: 1) It has been suggested that India Post should provide a no-frills low cost bank account with a focus on the financially excluded and that India Post should look for ways to leverage its low cost platform by providing India Post branded accounts to other strategic partners like MFIs and mutual funds and insurance companies. 2) Another recommendation has been in the area of money orders. It is suggested that the organization should apply itself towards the challenge of achieving high volumes of money orders. Specific stress has been made on the evolution of the money order to become a mechanism for transferring money from one POSB account to another, instead of just being a mechanism for delivering cash from one person to another. Thus a payments infrastructure with the postal organization at the centre and an array of contracts with partners should connect up all POSB accounts and accounts of its partners, to effectively become a person-to-person money order capability (through mobile phones or web browsers) for the populace. 3) Another suggestion has been in terms of handling the G2P payments. It has been advised that India Post form a large number of partners in terms of financial inclusion players, mobile service providers and innovative new technological choices in order to increase the size of the network. Thus this committee suggests an alternate solution to financial inclusion with the postal service at the centre of the plan – being the banker and payments provider for the financially excluded. An advantage of this solution is that the infrastructure is already in place and a quick implementation is possible. But this means that a key aspect of banking might be going out of the hands of the banking sector. Also issues regarding KYC/AML norms have to be figured out before this is adopted on a large scale, but still it is an interesting and innovative move towards financial inclusion.