Department of Post tweaks tender to woo tech companies for payment bank

 ET Bureau | Oct 25, 2016, 

NEW DELHI: The Department of Post (DoP), which is racing against time to ready its Payment Bank, has had to re-tender its technology contract after it failed to get bids from any of the major Indian technology firms such as Infosys, Wipro, TCS or the multinationals. 

In its first attempt to find a technology vendor to build the backbone for its ambitious payment bank, DoP found itself in a single bid situation – with the lone application of Polaris India. The development may push the launch of the postal payment bank by another few months giving a lead to its rivals — Paytm and Airtel — which are about to start soon. 

Officials of technology companies told ET that they decided to give the opportunity a miss since the contract didn’t make “business sense” and its terms and conditions were very “vague” and “open ended”. An executive of one of the top IT firms said that the department is under a lot of pressure to start the operations and wanted the implementation to happen within six weeks, which is impossible for companies to pull off. 

“They wanted the IPR of the banking platform to be handed over to them, nobody will do that,” said the executive who requested anonymity. The person added that who funds the cash flow was also very adverse and there were lots of other sticky issues. “We are looking for a fair agreement and it was not fair,” said the person. As per the current plan, India Post Payments Bank (IPPB) - as it has been termed - will eventually have 650 branches across the country. The department has to submit a final proposal to the Reserve Bank of India (RBI) – which had granted it in-principal approval in August 2015 – before March 2017. 

Another official of a large tech company said, “While all of us are Indians and we want to work for the country, it should also make business sense. We are making 15-20% profit on an international contract, our CFO will agree even if we are making about 10% margin in a domestic contract, but if they put a lot of conditions making even that much profit will be virtually impossible.” 

The executive who also requested anonymity said the contract took a very long term view on the payment terms with approval cycles only running close to 200 days to 300 days. “It required to be signed off by different people which is not a sellable model.” The person added that another point of contention was that it imposed “unlimited liability” on the vendors. The department of Post could not be reached for a comment. 

Posts has now come up with a fresh tender last week and officials said that they are currently studying the feasibility of it and will take a call in a few days on whether to be participate in it. “It looks better than last time, but we are still studying the `details,” said the first official quoted above. The RBI gave in-principle approval to 11applicants in August last year, including the Department of Posts, Aditya Birla Nuvo, Airtel M Commerce Services, Fino PayTech, National Securities Depository, Reliance Industries, Tech Mahindra and Vodafone m-pesa, for setting up payments banks. Three of the 11entities have already decided to back out, citing unviability. Alibaba-backed Paytm had appointed Infosys and its core banking software Finacle in June this year and is planning to launch its Payment Bank around Diwali.

Source : http://economictimes.indiatimes.com