The department, which has received expressions of interest from all the top global consultancy firms, including the big four, is pursuing a plan where there will be two Postbanks. The first will be the traditional financial services of the department. This includes the postal savings accounts and eight other post office savings schemes. Although not a Reserve Bank of India-recognized bank, this division, which is a bank for most practical purposes, will continue to operate in its existing form.
The second bank would be an entirely new creation with a paid-up capital in line with the Reserve Bank of India's requirement. The new entity will operate with a payments bank licence but will be manned with banking professionals recruited from the industry. The new entity will have 500-700 branches which will be housed in post office premises across the country. Despite its lean structure, the payments bank will reach out to all customers across the country by using India Post infrastructure through service-level agreements with the department.
"When it comes to financial inclusion, the post office has the capacity to be one of the most disruptive elements," said Ashvin Parekh of Ashvin Parekh Advisory Services, who has been an adviser to the department.
The department is expected to create a disruption because of its sheer reach. The infrastructure will include the 25,000 offices which are linked through leased lines, 1.3 lakh other post offices and the postmen and other employees of ?the department who will function as business correspondents.
By creating a new public sector bank, the government will overcome legal issues in converting postal savings customers into bank customers.
"For banks, the cost of inclusion is very high. As an industry, they are spending close to Rs 12,000 crore to telecom companies as part of the last-mile reach and another Rs 6,000 crore is spent on business correspondents. As against this, banks earn around Rs 4,000 crore. By using its existing infrastructure and their feet on the street, India Post can be a disruptive method of reducing costs," said Parekh.
The department of posts mobilizes over Rs 6 lakh crore of long-term savings under the various postal savings schemes. It also has close to Rs 40,000 crore in its postal savings accounts. To modernize the operation of the traditional Postbank, the department is implementing Finacle - a core banking solution from Infosys - which will be completed by end March 2016. The department is also deploying its own ATM network and issuing its own ATM cards to the postal savings account holders.
The only business which is likely to shift from the traditional Postbank to the new payments bank would be that of remittance. It is expected that the payments bank would be able to handle cash remittances much better than the post office and transfer cash within hours. This will enable the department to grow the business several fold.