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Tuesday, March 18, 2014

Madan Sabnavis underestimated the manpower of India Post

Madan Sabnavis (Chief Economist and General Manager of Credit Analysis & Research Limited) wrote an article, Why 'Post Bank of India' is not a workable idea, in Business Standard on 11/03/2014 without studying  anything about India Post and its rich manpower.  Most of the newly recruited employees of India Post are engineering graduates and other professional degree holders.  Shri. Madan Sabnavis underestimated the quality and efficiency of Postal staffs.  Postal staffs are the only employees who handle number of software and web application at a time in the same office to perform different types of duties.  Bank employees are doing transactions related to small number of products and they are handling one or two web applications.  Software handling capacity and technical knowledge of Postal Staffs are very high compared to Bank employees. Shri. Madan Sabnavis actually knows nothing about what is going on in India Post. Every bank is depending completely on third party institutions for technical and software support but India Post has one or two dedicated software development centers that develops software for foreign countries also.  Shri Madan Sabnavis should watch at least one or two postal blogs maintained by postal staffs to know something about the technological changes happening in Postal Department or he should get in touch with any Postal staffs before publishing blunders as research material.

From the article it can clearly see that Shri. Madan is a spokesman of Corporate and banking lobby and he has some hidden agenda in regard.  All such persons are making campaign for preventing India Post from getting banking licence from RBI. They actually fear the entrance of India Post in banking sector directly or indirectly.

Comments posted against the original article are quite interesting and some of them are very correct reply to the author and it depicts the unawareness of the author about the new concept, Post Bank of India.  

Extract from the article, Why 'Post Bank of India' is not a workable idea by Madan Sabnavis

(.......................) On the operational side, there are even more interesting puzzles. First, the 474,000-strong workforce consists of 263,000 dak sevaks, and another 203,000 gazetted Group C staff. The so-called office cadre would not be more than 7,000. Most of the others would be barely literate and could classify and stamp documents but may not be expected to go beyond that. In fact, they would more likely be conversant with only the regional language. Can they actually pick up banking and go through the normal training courses and exams that bankers are expected to undertake?

 Second, none of the staff members would know how to garner and use deposits. At present, customers come and deposit money and the postal official really does not care if it happens. The quality of service is quite mediocre in a monopoly-cum-government set-up that lacks incentive to perform and where the "baksheesh" culture dominates for many transactions. A metamorphosis is needed as far as mindsets and culture are concerned - it is a challenge and costs money. If we replace the entire staff with trained bankers, what will happen to the existing ones?

 Third, specialised functions, such as treasury, lending, investment and balance sheet management, require skill sets that even the existing gazetted officials do not possess. This will mean wholesale recruitment where the logistics will be mind-boggling. The only way out is if it becomes a payments bank a la the recommendation in the Reserve Bank of India's (RBI's) report on inclusion. But then, it is already performing this function and need not be converted into a new bank.

 Fourth, most of these post offices in rural India are too small, probably just a little room where stamps and letters are dispensed and letters picked up and distributed. They may not be stand-alone branches for a bank.

 Fifth, starting the business will be complex, considering that the balance sheet has a size of Rs 6 lakh crore on the liabilities side, with no assets as such, with these funds being provided to the government. Based on just the deposits, the size of this department would be as large as that of Bank of India or Canara Bank. How does one reckon capital adequacy when there are only liabilities and no assets? At Rs 6 lakh crore and with a capital adequacy ratio of 10 per cent, the government will have to put in Rs 60,000 crore. Where will this money come from?

 Once we put all these considerations together, it seems an India Post Bank will probably not work. Several regulatory and logistic issues have to be surmounted. One line of thought is that if the infrastructure is the premise on which post offices can become banks, then these post offices should ideally be leased wherever possible to banks on rent - which will help the department cut its losses. Moreover, this will get us out of our predilection to create new structures instead of integrating the existing ones with the present system. In FY 2012, India Post reported a loss of Rs 5,805 crore. In fact, the new banks, which are expected to allocate at least 25 per cent of their new branches in unbanked rural areas, could leverage these structures so that it becomes a win-win situation for banks, the RBI and post offices

( Source : )

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