Want a stamp? Buy a bond, a life insurance instead

Want a stamp? Buy a bond, a life insurance instead
NAVIKA KUMAR

NEW DELHI, NOV 23: Coming soon, to your neighbourhood, is the biggest supermarket of financial services that India has ever seen. A supermarket that has over 6 lakh regular workers, another 3 lakh non-regulars, and over 1.5 lakh branch offices through which it connects and services almost all of India's 6-lakh plus villages.

No, it's not a foreign bank with a fancy name. It's your humble post office. Thanks to a tie-up with IDBI Principal (itself a tie-up between IDBI and the Principal Financial Group of the US), the next time you go to buy a postage stamp at the local post office, you can have a look at the returns various mutual fund schemes are offering, and perhaps invest your money there. And, if you think the returns on the Indira Vikas Patra that you can buy at a post office are a bit low, maybe you can buy an IDBI bond instead. Or maybe a life insurance policy that the post office will offer in a few months, once IDBI Principal gets its life insurance license.

So, in its new avtaar, the Department of Posts (DoP) will act as a financial intermediary in addition to its traditional role of a postman. Initially, the IDBI Principal-DoP tie-up will be restricted to selling just the 7 mutual fund schemes that IDBI Principal has to offer. The agreement also ensures that these certificates will be delivered by the post office through their speed post route. And once initial glitches get ironed out, and the tie-up starts functioning smoothly, IDBI Principal will offer all IDBI's products to buyers at the post office as well -- that includes all bonds, and even public issues that IDBI may be underwriting or is lead manager for.

For the post office, it is a natural progression, in its attempt to find newer and better avenues of funds. After using postal stationery as an advertising medium, the Department of Posts (DoP) hit upon the idea of offering financial services through its network to generate additional revenues for the government.

`And the next stop could be insurance. After all, the DoP's main asset is its huge network of post offices across the country and we can use this to our advantage by diversification,' says Tapan Sikdar, Minister of State for Communications in an exclusive interview to The Indian Express.

`The Postal Department runs up annual losses to the tune of Rs 2,000 crore annually. But with new avenues opening up, we are thinking of novel ways to earn revenues and improve our bottom line,' Sikdar adds.

The entire mutual fund industry collects around Rs 65,000 crore every year. `We are targetting for 10 per cent of this share in the initial phase which means a market of Rs 6,500 crore. The commission that we could earn on this at the rate of one per cent also to start with will give us revenues of Rs 65 crore,' Sikdar points out. `The scheme will be launched next month,' he says.

In the first phase the DoP has selected four cities for the pilot project -- Delhi, Mumbai, Calcutta and Patna. While Delhi and Mumbai qualify as important metros even for the DoP, Calcutta (apart from being a Category `A' metro) has the added advantage of being Sikdar's home city and constituency. Patna, of course, is the capital of the home state of Communications Minister Ram Vilas Paswan.

In the pilot project 100 post offices would be selected with an eye on the potential business they can generate.

At each of these designated post offices, one or more counters would be dedicated to this business. The applications received at these counters would bear the post office's code based on which the commission would accrue to it. Each application received by the Post Office will earn them Rs 10 as a commission fee.

In addition, the Post Office could also receive applications on behalf of other agents for which the commission would be shared between the post office and the agent in the ratio of Rs 7 to Rs 3 respectively.

Not only this, additional revenues will be generated as IDBI will now send Mutual Fund certificates through Speed Post rather than curier, becoming a large corporate customer for the DoP.