India Post wants to own a bank. This is a great idea. In one stroke, this can ensure that millions more will get access to formal credit, in one of the most under-banked countries of the world.
The biggest advantage for India Post, among the most enduring institutions set up by the British, is its huge network and customer base. Compared to roughly 1,00,000 commercial and rural bank branches in India, there are 1,55,000 post offices, a majority in rural and semi-urban areas. As a collector of small savings, it has experience in taking deposits — about Rs 6 lakhs crore at last count — but not in lending. A bank licence for only India Post would mean that the network of bank branches would more than double in one stroke.
India Post also fits the bill on other counts: a long track record of integrity and, most important — with one post office for every four villages — a massive presence in rural India, where the RBI wants 25 per cent of all branches to be located. Forget micro-finance companies, even compared to government-owned banks, the postal bank's cost structure, if it assigns some banking duties to postmen, will be lower.
