Post Offices are planning diversification to boost up their income
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Post Offices in service of people
Indian Post Offices experiencing change
Money back offer from couriers
Big domestic courier companies like Overnite Express and DTDC are offering ‘next day delivery, or money back’ offers to woo big clients. Through this offer, they are trying to tap the premium express delivery services sector. Already such money back guarantees are offered by international express delivery firms such as DHL, FedEx, TNT and UPS. But the charges the users have to pay to avail this service are steeper by 25% than the ordinary delivery charges. The service has been launched in select metropolitan cities to begin with.
Post offices will soon become banks
Compared to this progressive move, post offices in India are rather sitting idle and maintaining the status quo. A delivery of ordinary mail takes anything between two days to fifteen days, depending on the place to be delivered. But Indian post offices are also burdened with other services like postal life insurance, pension payments and money transfer services. They are also functioning like mini banks, offering banking services like deposits, savings bank accounts, bonds, tax saving schemes and money order transfer. Very soon, 1.5 lakh post offices are to be converted into full fledged banks. This means, they have to make loans and advances, issue demand drafts, offer safe deposit lockers and other services that a bank normally does. Already post offices are issuing cheque books and updating the pass books of the customers. Post Offices are understaffed and do not have proper infrastructural facilities to offer these services. In most of the places, post offices function in rented premises, which had been a house with two or three rooms before. The Post office staffs lack adequate training to handle technological problems. Many staff members do not have a thorough knowledge to handle computers and printers.
24 crore active accounts
There are 24 crore active accounts under various schemes of post offices already. The post offices are to get ATM facilities and will issue debit and credit cards also. Other works that the post offices are likely to be entrusted include payment to workers of NREGS, payment of social benefits, collection of bills, payment of insurance claims, mutual fund contributions, acting as business correspondents of business facilitators and money transfers. Only 35 to 40 per cent of villages are covered by the banking sector in India. But post offices have been set up in many villages. The government’s thinking is that if post offices are converted into banks, it will enable financial inclusion of the underprivileged people. Setting up bank branches in many villages is a very difficult and costly task. Therefore the government has come to the conclusion to convert post offices into banks.
Postal employees enjoy great respect
But postal employees enjoy great respect among the public in rural and semi-urban areas. Therefore, they are in a position to help the local public to meet their banking and financial requirements. Local people can access these postal employees more freely unlike the bank employees, who have set up a firewall around themselves in most of the areas and are inaccessible.
Save girl child
Postal department has been popularising certain social themes of late, by issuing special covers or stamps. Recently it issued a special cover on ‘save the girl child’ theme. Sex ratio in India is fast declining and causing concern. Girl babies are prematurely aborted or killed immediately after birth in many rural and semi-urban areas. Even in some cities, this habit is prevalent. Of course, by issuing a postal cover, this evil habit cannot be abolished overnight. That is not the intention also. The postal cover will inculcate awareness in the minds of the people about the evil custom that is going on across the country.
Injustice to rural investors
The government did an injustice to small savings investors by reducing interest rates and reducing bonus also simultaneously. Many old aged people, retired people and poor people have deposited their small savings in the Post Offices and managing their living through the tiny income that comes by way of interest from these deposits. In fact, we are witnessing a scenario today in which big depositors depositing huge money in banks get more returns than small rural depositors saving their small amounts with post offices. In other words, the government robs the poor and rewards the rich. This anomaly should be set right immediately. Interest rates on post office schemes should be raised above bank deposits so that rural population is encouraged to save more. That will automatically bring financial inclusion.
Small savings constitute an important source of income to the government
Small savings form an important source of income to the Central government. A part of the government’s fiscal deficit is financed through small savings. But the percentage of small savings in financing fiscal deficit of the government is dwindling over the years. This forces the government to go for the market borrowing to finance its huge fiscal deficit. If the government raises interest rate on these small savings schemes, it will not only help the rural poor to lead better standard of living, but also will easily finance the government’s fiscal deficit. The total internal liabilities of the central government has increased from Rs.24.35 lakh crore in 2006-07 to Rs.41.82 lakh crore in 2011-12. But liability on account of small savings has increased only from Rs.5.39 lakh crore to Rs.6.09 lakh crore. Because of this, the share of small savings as a percentage of total liabilities has come down from 22.1% to 14.4%.
Move to reduce commission to agents is retrograde
There is also a move to reduce the commission payable to small savings post office agents. This is a retrograde move. There are more than three lakh post office agents. They are leading a life only because of the commission they receive for canvassing the various schemes of the government among the rural and semi urban people. Even in cities, many people are not aware of the benefits of the post office small savings schemes. These agents work hard and bring more deposits to the government. The commission they receive is very small. Even in this commission, they have to share with the people depositing in the schemes. If we consider that each postal agent has three dependents on him, then more than twelve lakh people are dependent on the postal agents for their livelihood. In one stroke the government should not rob this small income to the agents. That will be a setback to social justice. Moreover, such a retrograde move will bring down the post office savings. Without the help of the agents, people will not go to post offices and deposit money. Even if some people go, they will not get a good service from the post office staff, like filling in the application form etc. The postal agents visit the home of the people and do all these services. Therefore, their services should be retained and in fact their commission should be increased as a reward. Only that move will produce true financial inclusion the government is aiming at. If the agents are discouraged, people will also stop depositing their money. Savings habit among the people will go away. As a result, financial inclusion concept will be defeated.
The government is planning internet connectivity to post offices by 2012-13. Already 22360 Departmental Post Offices have been provided with computers, 1308 of them have been provided with Wide Area Network (WAN) and 10530 of them have been provided with broadband facilities. The postal department has tied up with US-based firm MoneyGram International to offer a money transfer services for Indians living abroad. This is the postal department’s second tie-up. The first was with the Western Union. The postal department is planning to launch online services for the customers. The service will be an interface for the customers who want to access public services like obtaining birth and death certificates, passport applications, employment exchange registrations, online application for learner’s license and other services. This online services facility has been launched in Chennai city recently. It will spread to other places in due course.
Biggest postal network in the world
India has the biggest postal network in the world with 1.55 lakh post offices. An overwhelming majority of these namely 1.4 lakh post offices are in rural areas. It has 23.75 crore individual savings bank accounts. Post Offices are planning to set up over 800 ATMs for postal and other customers. There is also a move to convert important post offices into shopping centres. Already, post offices receive only 50% of their income through traditional business of selling stamps, postal covers, money orders, parcels and speed post. The department is strengthening its business development wing to develop new initiatives.
Courier industry is worth Rs.7000 crore
The courier industry in India is worth Rs.7000 crore and employs around one million workers. It pays the government Rs.1200 crore as service tax. The couriers are allowed in the EMS segment without any restriction or price, thereby making the market fiercely competitive. Speed Post is the only EMS service provided by the post offices. It was introduced in 1986.
Post office offers several advantages over banks
Interest earned on post office savings bank account is tax-free upto a limit of Rs.3500 per annum, whereas in banks, it is taxable. In case of joint accounts, the ceiling is higher at Rs.7000 per annum. In banks, the minimum balance for maintaining an account is Rs.5000 – Rs.10000 depending on the locality. But in post offices, the minimum balance maintainable is only Rs.500. The premium rates of postal life insurance policies are lower than that of other insurers. But the hitch is that only employees of the Central and State governments, public sector enterprises and semi-government organisations are eligible to avail postal life insurance. Anybody can open a New Pension Scheme (NPS) account with post offices. One can buy 24 carats pure gold coins of denominations 500 mg, 1.5 g and 8 g. These coins have been imported from Switzerland and have been certified by the World Gold Council. There is one big advantage in post office money transfer as compared to bank money transfer. In banks, one needs to maintain an account for transferring money and the recipient should also maintain an account. Even if a small amount of fifty rupees is transferred through the banks, this condition cannot be waived. On the other hand, you can transfer thousands of rupees through post offices without having any account with it. The recipient also need not have any account with the post office. In case of money transfer in banks through demand drafts and mail transfers, the transferor need not have an account, but the recipient should have an account. Secondly, banks do not transfer funds through home delivery. Post offices offer these services. In banks, funds transfer means only a credit to the account of the recipient and not cash. In post offices, the transfer is in the form of cash. Post Offices offer unique identity cards to customers and others.
Tie-up with Fabindia
At present, post offices are not contemplating selling mutual fund schemes. If SEBI brings back the upfront commission, then post offices may think of selling mutual fund schemes. Postal Department has tied up with the retail chain Fabindia, which will help customers to send Fabindia products to their friends and relatives across the world. Fabindia is one of India’s largest retail chains having 140 stores across 58 cities in India. The post office counter at the Fabindia outlet will offer the international and domestic flat rate parcel service and EMS speed post service.
Core banking in post offices next year
Postal department’s revenues increased from Rs.5024 crore in 2005-06 to Rs.6267 crore in 2009-10. The losses have increased from Rs.1210 crore to Rs.6642 crore. With 155000 branches, the post department has 475000 employees. Post offices are planning to allow the users to fix their own stamps on the envelope. The stamps can have even the portrait of the user. This move is aimed at lifting the post office’s sagging revenues. The postal department is planning to introduce core banking solution next year.
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