At least 15 companies,
including Wipro Ltd, Infosys Ltd and International Business Machines Corp. have
shown an interest in handling the back end operations of India Post Payments
Bank (IPPB).
All of these companies
have responded to a request for proposal (RFP) released by the department of
posts on 1 July on its website, a person with direct knowledge of the matter
said. The RFP aims to select a systems integrator for delivery of business applications
and IT systems for IPPB for a period of five years, and each of these companies
has paid Rs.50,000 for the tender document.
The department of post is
expected to brief the applicants in the next few days, and the final bids are
expected to come in by the beginning of August.
“Both in terms of size and
value, the contract is huge. Unlike any other large commercial banks, this will
have to have a lot more levels of simplicity since it caters to a different
category of customers,” said Ravi Trivedi, an independent consultant who was
formerly with audit firm KPMG.
The contract size could be
roughly for at least Rs.500-700 crore, Trivedi said.
The postal department will
then take a couple of months for evaluation before announcing the winner, said
the person aware of the issue quoted above.
“Payment banks’ business
models are based on technology; so, there will be high focus and spending on
technology,” said Abizer Diwanji, partner and national leader, financial
services, EY India.
The department of posts
has already awarded a contract to Infosys as its financial services integrator
for implementing core banking solutions and installing automated teller
machines. Tata Consultancy Services Ltd also won a six-year contract in 2013
for India Post’s IT modernization programme.
Prime Minister Narendra
Modi’s government, as part of its Digital India programme, is banking on IPPB
to take its schemes such as direct benefits transfers to the remotest corners
of the country on the strength of India Post’s strong network of about 150,000
post offices.
Like other payments banks,
IPPB will target financially excluded customers such as migrant workers,
low-income households and tiny businesses. It will not lend and, as a result,
will be shielded from the risks that conventional banks are exposed to.
“Payments banks are a very
strong component of Digital India and can have a high impact and will bring
down the cost of bank transactions in rural areas,” said Ashis Sanyal, a former
senior director at the department of electronics and information technology.
The department of posts
was among the 11 entities that got an in-principle approval from the Reserve
Bank of India (RBI) in August 2015 to start a payments bank. Of these, Tech
Mahindra Ltd; Sun Pharmaceutical Industries Ltd promoter Dilip Shanghvi and his
partners; IDFC Bank Ltd; Telenor Financial Services, and Cholamandalam
Investment and Finance Co.— have surrendered their licences after they
discovered the business is characterized by high volume and low profit.
For India Post, though,
the business will be a natural extension of its work.
Considering the size of
India Post’s operations and its reach in the hinterland, this vertical is a
lucrative proposition both for the government-owned entity and the private
companies who seek to work with it.
Infosys did not respond to
queries sent on Thursday.
“We do not comment on
ongoing business pursuits,” a Wipro spokesperson said.
On 8 July, the cabinet
approved a proposal to set up IPPB with a corpus of Rs.800 crore. The then
minister for communications and information technology, Ravi Shankar Prasad,
had said IPPB had plans to open 650 branches and will be operational by
September 2017.
The payments bank will
begin with Rs.400 crore equity capital and a Rs.400-crore government grant.
IPPB plans to set up 5,000 automated teller machines as well, Prasad had said
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