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A Licence Well Deserved

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It is very good news that the Reserve Bank has decided to give the Post Office a bank licence. It is not surprising. The Reserve Bank is extremely protective of its own daughters, the government banks, which are inefficient and unfriendly to customers. Although the government has been prodding it for at least eight years to issue more bank licences, it has effectively sabotaged new competition. However hostile it may be to new private banks, it can hardly say no to the Post Office, which is a daughter of the government and hence a close cousin. And the Reserve Bank probably underestimates the capacity of the Post Office. I do not know when the Reserve Bank’s prime obstructor, otherwise known as deputy governor, walked into a post office, but he cannot have been impressed by the worn-down look and lackadaisical work style. However bad government banks may be, no deputy governor would think of the Post Office as competition.
 
But the Post Office can compete; even more, it can set banks a model. Banks work five hours a day — four hours if you deduct the time bank staff spend scratching their heads. The Post Office works seven hours a day. The work culture is not much better than in a bank, for quite a different reason. Nowadays, with the proliferation of couriers and email, fewer and fewer people are going to the Post Office; as the number of customers drops, the staff get out of the habit of working.

There was a corrupt minister of posts some years ago. He saw that many post offices were in prime commercial areas; so he sold them off to landlords or shops and got enormous bribes. I refuse to become a modern man; I still write cheques, and send them by ordinary post. When I recently wanted to post the letter, I could not find a post box anywhere near my place in south Calcutta. I walked for hours, and finally found a post box; perched above it, on the first floor, was a post office. Of the four windows, only one was manned — the savings bank one. I waited and waited; the staff were busy playing games on the computer or gossiping, and would not look at me. Finally, I made enough noise to lure away a nail biter, and got stamps.
 
The queue at the savings bank counter was long. This is the first thing the Post Office must change if it wants to succeed as a bank: it must open more bank windows, and it must make its staff serve at all windows. And banking business is fine; but the Post Office has a very good business of money transfer. Banks are lousy at money transfer, partly because their clients can issue cheques. So will Post Office clients be able to once it becomes a bank. But they are used to sending money through the Post Office. Today, a Bihari watchman in a Goa night club can go to the post office and give in cash, and it will be delivered to his wife in Daltonganj in Jharkhand in two days. It is a tremendous convenience which Post Office clients value; it should preserve and develop it. Banks specialise in taking customers’ money and lending it out at twice or even higher interest. The Post Office must specialise in taking their money and delivering it to their nominees as promptly as possible.
 
But if it becomes a bank, the Post Office will have to do banking as well. It lends all its money today to governments; it will have to find new, private clients. It must not imitate the commercial banks and look for big, rich clients; it should give small loans to clients known to its local branch managers. It should become India’s first neighbourhood bank.
 
India nationalised its banks, and made their managers civil servants — lazy and risk-averse. They sabotaged the government’s efforts to take banking to small borrowers in small towns and villages. The Post Office was kept out of lending to them. Now that it will be allowed to do so, it should make a success of lending to the common man.

The author is Consultant Editor of Businessworld.

ashok(dot)desai(at)gmail(dot)com

(This story was published in Businessworld Issue Dated 08-04-2013)