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Tuesday, December 7, 2021

Yet to Play The Game!


India Post must be included in the process of financial inclusion
AMIR HOSSAIN | Issue Dated: November 10, 2013, New Delhi
Tags : financial inclusion | RBI | Universal Postal Union | World Bank |

Financial inclusion has become a buzzword today across the nation. Although since Independence the Reserve Bank of India (RBI) has been working for the welfare of the economy, it was only in 2004 that for the first time RBI emphasized on the concept of financial inclusion. Surprisingly, RBI has most of the times talked about opening more banks as part of financial inclusion, overlooking the potential of India Post. Even a few days back, RBI governor Raghuram Rajan stated, “Easier entry of foreign banks into India is welcome. This would raise competition and efficiency and bring in technology and expertise to foster financial inclusion.” But in reality, without considering India Post as a tool for financial inclusion, it will be very difficult for India to achieve its vision of including the masses.

There are several reasons why India Post can play better role rather than banks in the process of financial inclusion. A recent joint study by Universal Postal Union and the World Bank confirms that “unbanked people, including the poor, less educated and unemployed, are more likely to get their financial services from a post office than a bank or other financial institution.” A significant comment by Leora Klapper, Lead Economist at the World Bank’s research department goes like this, “Our findings [have helped us]...develop a deeper and more nuanced understanding of how [post offices] can increase financial inclusion.” India Post has an adequate infrastructure and reach to push up financial inclusion in a substantial way. For instance, as many as 139,000 post offices are in rural areas out of the 155,000 post offices across India. In contrast to that, only 34,000 (out of 85,000) scheduled commercial banks and Regional Rural Banks are in rural areas. The average number of banking network per lakh population is only 6.33 as compared to 13.93 in the case of India Post.

There are other areas where India Post outshines banks, and those are perceptions of security and cost. India Post is serving as the banker to the common people over the last 130 years – with post office savings schemes leading the way. More so, India Post is considered as a trustworthy investment destination across India secured by the government. In contrast, not only is setting up a new bank branch expensive, people consider banks riskier than post offices. Many countries across the world have started to focus on post office financial services rather than opening new bank branches for financial inclusion. At the beginning of the year, Airtel, the second largest mobile phone provider in Madagascar, announced that “it is expanding mobile money services to 170 post offices throughout Madagascar” instead of using banking facilities which cover only 5 per cent of people there. Asia's largest island, Borneo, is also including all people financially by using its post office networks. Now, India Post should be provided budgets to implement the latest systems and computerised networks to rival those used by banks currently. That would bring a revolution in financial inclusion in India better than emphasizing on setting up of new banks.

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Issue Dated: Feb 5, 2017