MUMBAI: India Post has moved a step closer to starting its own bank as it has received an informal assurance from the authorities that it will be granted a payments bank license.
The state-owned postal services department has floated an expression of interest, or EOI, inviting consultants for its banking foray, two people aware of the matter told ET. Top consultancy firms, including PwC, McKinsey, BCG and Deloitte are in the race to help in conceptualising the proposed bank's structure. The EOI will remain open for application for another month.
This is one step before the department launches the request for proposal, or RFP, inviting official bids from consultants with price quotations. "There are precedents globally of successful transition of postal departments into banks," said Shinjini Kumar, executive director and leader, banking and capital markets, PricewaterhouseCoopers, a consulting firm. "Given their wide infrastructure and trust, India Post's business model is suitable for a bank."
"But in the long run, the success of a business model depends on the successful execution and long-term sustainability. In the context of new digital businesses and competition, execution will be the key," she said.
The first set of new banking licences will be issued by August. As many as 41 applicants have applied for the payments bank licence. "I hope to announce at least one set of bank licence by August end," Reserve Bank of India Governor Raghuram Rajan had said during the monetary policy review on June 2.
"We need to upgrade the technology before we plunge into a banking business. Consulting firms can guide us in the right direction," said a senior official of India Post, who did not wish to be named. MS Ramanujan, a senior member from the Bengaluru circle, has been promoted to look after the banking business, but he is to assume official charge.
"The major challenge to India Post is technology, where it requires a lot of revamping, particularly for a payments bank which is expected to be a technology heavy business model," said Saurabh Tripathi, partner and director, BCG.