VIEWS OF A SENIOR OFFICER ON IPPB

                  Gautam Bhattacharya, Ex. CPMG - West Bengal Circle

October 9 is celebrated all over the world as World Post Day under the aegis of the Universal Postal Union. In India, the week commencing on the World Post Day is followed as National Postal Week that ideally should be the period of introspection for India Post, the 166-year-old monolithic organisation. A recent news report in a section of the media about the possibility of converting the bank in the post office to a holding company with all regional rural banks and India post payments bank being part of it, to beat down the "mounting loss of the Department", has created some degree of curiosity amongst those in the banking industry. In order to understand the implications of such a possibility, we need to understand the present structure of India Post vis-à-vis what is being talked about.

The first and foremost identity of India Post is its role as national mail and parcel service provider. Its huge network of more than 1.55 lakh branches, being manned by 4.2 lakh employees, was all created to fulfill the 'universal service obligation' of the organisation so that no resident of the country is denied a basic communication facility. It is too simplistic to judge the performance of such an organisation through the narrow prism of profit and loss. We don't do this when it comes to a universal health care facility or universal elementary education. The pricing of most of the services rendered by India Post is subject to the approval of the Parliament where social utility is of primary consideration and not profitability.

A registered newspaper posted at any place of India will be delivered at any other place of the country just for 25 paise. Is it not subsidised to a ridiculous extent? Perhaps the cost of operation would have been less if transmission and delivery was made free because the cost of printing of a postage stamp itself may be more than 25 paise. A book packet containing a printed book weighing 200 grams will cost Rs 2 for its transmission and delivery from one corner of the country to another. India Post religiously takes care of such mails which commercial couriers may not even think of touching just because of the social relevance of a book or of a newspaper. Thus, it makes no sense to assess the balance sheet of a social organisation in terms of profitability.

            The post office also retails various national savings schemes of the Government of India. Because of its extensive reach, these schemes popularly known as postal savings schemes are quite popular even under the low-interest regime. The primary characteristics of postal savings schemes are inclusivity. Even the poorest of the poor, residing in the remotest locality, are today partners of nation-building and their savings play an effective role in boosting the domestic savings of the country, indicating the strength of our economic system. Funds so mobilised by post offices from every nook and corner of the society are parked at the National Small Savings Fund under the disposal of the Government of India. So, there is no question of earning 'profit' or incurring 'loss' out of this fund. However, the fact remains, nearly half of the postal employees are engaged in savings related work and expenses incurred by the organisation in running the schemes is reimbursed by the Ministry of Finance. In the balance sheet of India Post, such receipts have turned out to be higher than the receipts from mail and parcel business in recent years in spite of the boom in the e-commerce business in the post offices.

 Since the post office in most parts of the world is in the job of mobilisation of savings for more than a century, in many countries, post office savings work was brought under the structure of a formal Bank in the last four decades. This was not done in India. The Postal Department was trying to get a universal banking license from the Reserve Bank of India for more than a decade. Finally, in 2015, RBI granted the license to set up a 'payments bank'. India Post Payments Bank (IPPB), a new Public Sector entity under the ownership of India Post was inaugurated by the Prime Minister on September 1, 2018, with lots of expectations. The Payments Bank was set up with a lean structure, reliant on a very strong IT backbone and banking professionals were recruited to take care of the back-office work and for regulatory compliance. The public interface of IPPB is only through the counters of 155,000 post offices. Postmen and the Gramin Dak Sevaks in the IPPB model are supposed to facilitate digital transactions in the doorsteps of the account holders through the smartphones provided to them for this purpose. The outdoor staff of the post office in this model is supposed to act in a manner very similar to what was conceived for banking correspondents, an idea that never took off well earlier. IPPB is the first payments bank of the country to receive the scheduled bank status of RBI and by one stroke of the pen, this model enhanced the number of rural branches of scheduled banks in the country by 2.5 times.

Two years is too little time to assess the profitability of an organisation with a pan-India presence. IPPB is expected to reach break-even in three years and the organisation is aimed at facilitating the first-generation customers to the world of digital banking. In the first two years, IPPB enrolled more than 3.6 crore customers and completed over 38,500 crore transactions mostly in semi-urban and rural areas. In terms of the direct benefit transfer (DBT) of Governmental subsidies in the account of the beneficiaries and in terms of Aadhaar enabled payment service at the doorstep of villagers, IPPB has done wonders in first two years of its existence. As per a recent announcement, transactions on Aadhaar enabled payment services reached an average number of 1.46 lakh per day, involving Rs 30.5 crore in a day.

In India, the share of Unified Payment Interface (UPI) today has the highest market share (22 per cent) as compared to other systems of digital payment. The market is getting proliferated by digital wallets. In that background, what will be the need of the 'payments banks' in the years to come in the world of instant real-time payments business can always be debated. Even in such a competitive environment, profit (after tax) of Paytm payments bank increased from Rs 19.2 crore in 2018-19 to Rs 29.8 crore in 2019-20. Whether in the years to come IPPB will be converted to a full-fledged bank to offer microcredit in rural areas, whether the work of retailing national savings schemes will be shifted to IPPB in course of time, whether regional rural banks will be merged with IPPB, are all too premature to discuss in the present scenario. IPPB is a new concept altogether, being tried for the first time in the banking industry of India and the new set up has shown a lot of promise in the first two year.