It's a nationwide dilemma for ICICI Bank. How can it transfer money quickly to towns and remote rural areas where it doesn't have branches?
Now the bank is experimenting with a new tie-up that could have far-reaching implications. It has teamed up with 13 post offices around the country for electronic money transfer.
If all goes well, many more ICICI Bank products may be sold through the post office network.
"India Post gives us a complete national reach and penetration besides being partners in transactions," says Madhabi Puri Buch, general manager, head of products and technology group at ICICI Bank.
Here's another sign of changing times. Last month an advertisement in some of Mumbai's leading dailies made it clear that everything in India Post is up for sale.
Potential advertisers will soon be able to advertise their wares on postcards, inland letters, letterboxes, mail vans and even the postal premises.
What's more, Indian Post's marketing team is on a whirlwind promotion drive, calling on banks and insurance companies and inviting them to push financial products through the post office.
How do you take the Penny Black into the Internet Era? How do you transform an ailing government-run colossus like the Indian postal system and turn it into a lithe, fast-moving organisation that will take on courier companies on the one hand and battle the challenge from e-mail and other forms of electronic communication on the other? In other words: how do you shed the Snail Mail tag?
The answer: leverage the giant strengths of the post office.
Anyone who doesn't understand the strengths of the postal system should take a short walk round their neighbourhood. Is there a post office nearby?
The answer is almost certainly, yes. OK. It might be a bit rundown. And there isn't much technology in sight. But that could soon change.
Says R Ganesan, the dynamic principal chief postmaster general for Maharashtra & Goa, "We want to position ourselves as a modern organisation ready to take on the challenges posed by competition and technology."
For the first glimpse of the future, step into the General Post Office in Delhi. In one corner is a glittering, new ATM machine belonging to UTI Bank.
This is not, by itself, a huge harbinger of change. But UTI is looking at ways of tying up with the post office and installing machines in different parts of the country -- even remote areas.
That isn't all. UTI has already started selling a range of products at post-office counters. It is doing electronic money transfers and even cash disbursements. UTI Bank services are available at 300 post offices around the country.
Says Rajagopal Srivatsa, vice president (institutional business) at the bank, "We have found the system robust and cheaper. The post office provides a viable alternative at a location where we don't exist."
One asset management company has already realised that the post-office network can do wonders for its business.
In October 2000, IDBI-Principal became the first asset management company to enter into a partnership with India Post. The tie-up has clearly been a hit.
Today, IDBI-Principal pushes products like its flagship Bond funds and the tax saving funds through 200 post offices, and claims that business is booming.
In fact, last year, out of the total 30,000 new applications, 10,000 were generated at the post office.
"This year, we expect an almost 40 per cent jump through this channel," says Sanjay Sachdev, managing director and CEO of the AMC. "It's a win-win situation for the post office."
Buoyed by the activity, India Post is talking to ICICI Bank, Vysya Bank, HDFC Bank and the freshly minted Kotak Mahindra Bank.
Says Puri Buch: "There are an entire gamut of possibilities like ATMs, home loans, personal loans and even consumer durable loans to be explored." Adds a senior postal official, "Most banks and financial institutions want an outlet for their services, and we are strategically located."
The fact is that the post office -- like the beer in the advertisement -- reaches parts that other organisations don't.
That's what Western Union, the aggressive US money transfer company, realised some time ago. Western Union considers India one of its big markets and it has tied up with 11,000 agents around the country to distribute cash to its customers.
Out of this 4,000 are branches of the post office.
In fact, Western Union is deepening its relations with the post office.
Last month, it took a team of post-office officials on a marketing trip to Dubai. The postal officials, the marketing partners of Western Union, were showcased as their public face.
"It is a new market for us and taking our partners, known for their reliability, was an image booster," says Anil Kapur, regional director, South Asia, Western Union.
It isn't tough to understand why banks and financial institutions are looking enviously at the postal network.
Consider the figures. All the nationalised banks together have about 65,000 branches. By comparison, India Post has about 155,000 outlets and about 138,000 of these are in rural areas.
Over the years, the post offices have accumulated savings deposits of Rs 10,044 crore (Rs 100.44 billion). Last year, it sold 25.59 lakh (2.559 million) postal life insurance policies with an assured amount of Rs 11,870 crore (Rs 118.70 billion).
For 2001-02, India Post had a total revenue of Rs 3,697 crore (Rs 36.97 billion), a 12.11 per cent increase over the previous year, with a shortfall of Rs 1,411 crore (Rs 14.11 billion).
The revenue earners were largely basic services like sale of stamps, postage realised in cash, commission on money orders, other receipts and remuneration for savings bank.
It does not include the income from premium products, which in the same period increased from Rs 225 crore (Rs 2.25 billion) to Rs 395 crore (Rs 3.95 billion).
Geographical spread is the giant plus that makes India Post an attractive partner for many banks, financial institutions and other organisations.
But that, by itself, wouldn't be enough. The fact is that the organisation's senior officers are determined to bring about change.
Already, they've pumped in more than Rs 100 crore (Rs 1 billion) in technology upgradation. The organisation's Postal Training Centre in Mysore is working overtime to develop new software that will integrate the network and bring all its branches online.
It currently has 150 V-Sats and 1,000 branches online.
How does the new software work?
Earlier, one had to run from pillar to post for registration, money orders or domestic and international courier service.
Now, the newly-installed Meghdoot Millennium software allows these services to be electronically conducted by the newly-installed multipurpose counter machines. "It is a one-stop shop," says a postal clerk.
How about e-mail, the modern-day competitor to the post-office?
A pilot project, E-post, is underway in Maharashtra, Gujarat, Kerala, Andhra Pradesh and Goa. An individual is given an E-post ID based on his geographical address. His e-mails are downloaded by the postal department, printed and physically delivered to the addressee.
This will enable people who don't have access to computers to get e-mails from anywhere in the world in a matter of hours.
Then, there's the possibility of paying bills through the post office. E-billing, a payment service, was recently launched in Bangalore and Kolkata.
It is for the easy payment of all kinds of bills at post-office counters. Talks are on with both MTNL and BSNL about bill payments.
Similarly, it has already started distributing coins on behalf of the Reserve Bank of India. The arrangement is simple: the branches collect bagfuls of coins from the RBI and distribute them from their counters for a small commission.
The pilot project initiated in Mumbai covers 20 post offices, a service made necessary by occasional coin shortages.
India Post is even hoping to bring the humble postman into the cyberage. It is considering a project to provide WLL phones in rural areas via the postman who will carry the phone and charge as per a portable meter.
"It will make life easier for rural people who often walk long distances to reach the nearest booth," says a senior postal official in Delhi.
But why is the Department of Post desperate to change? "It is a case of either we innovate or perish," says Ganesan.
Both competition and technology have been gnawing at India Post's revenues. While couriers and money transfer companies have attacked its fee-based business, the ubiquitous e-mail has made inland letters, postcards and stamps passé.
At Mumbai, one of the largest revenue earners for India Post, average daily mail before 1996 was 44 lakh (4.4 million) letters and 300,000 registered post. Today, daily letters are down to 20 lakh (2 million) and the registered volume to 100,000.
Nationally, while commissions on money orders have gone up marginally from Rs 262 crore (Rs 2.62 billion) to Rs 284 crore (Rs 2.84 billion) over the last two fiscals, stamp sales skidded from Rs 1,004 crore (Rs 10.04 billion) in 2000-01 to Rs 989 crore (Rs 9.89 billion) last year.
In the same period, Speed Post, set up in the 1990s to take on courier companies, grew from Rs 15 crore (Rs 150 million) to Rs 20 crore (Rs 200 million).
Again, the urgent need to streamline the system comes at a time when the government is trying to widen the tax net.
"For a long time, investing in post-office schemes has been looked upon as a means of hoarding money. Since the post offices are not connected by technology, unlike banks, you could have accounts in as many outlets without anybody knowing," says a postal executive.
India Post's current technology push could change that. Also, once the proposed Payment System Regulation Act is in place, the electronic funds transfer by the post office in association with any of the money transfer firms will come under the RBI ambit.
At the moment, payments made by the post office or stock market-related payments are not monitored by the RBI. A draft bill on the subject is yet to be passed by the finance ministry.
For all this drive, the post office is a government organisation. All its partners invest in training the post office staff for marketing their products.
But partners say that all their effort goes for a toss when the point man is transferred. "It is a nuisance for both the consumer and us," says an AMC head.
Motivation is another issue. Like any other public sector undertaking, the postal department is obese, with a 600,000 headcount.
Anyone who goes into a post office regularly knows that the customer doesn't always come first. Talks about a voluntary retirement scheme are doing the rounds, but staff say that there is no incentive for performing.
"We are paid a pittance, so how can we get motivated? We are asked to think of the consumers, but who will think about us?" says a 52-year-old postman in Mumbai.
But in its haste to generate revenues, is India Post spreading itself too thin? "Not at all, we are using our own resources. If our postman can deliver letters, he can also offer other facilities," says Veena R Srinivas, director, GPO, in Mumbai.
Already, India Post's thrust area is business development -- bringing in more organisations to leverage the postal services.
It has set a business development target of Rs 600 crore (Rs 6 billion) for this fiscal and all the states are rushing ahead to meet it.
Maharashtra is the highest at Rs 125 crore (Rs 1.25 billion), followed by Delhi at Rs 100 crore (Rs 1 billion).
Today, the post offices in different states are trying to outwit each other in terms of revenues. The ball is rolling. As ICICI Bank's Puri Buch says, "Their attitude and mindset is completely forward looking. They are thinking of the consumer."
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