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Indian Post makes investing easy

Arti Sharma | January 31, 2004

For anyone planning to buy National Savings Certificates or Kisan Vikas Patras in the near future, there's good news. You no longer have to stand in long queues for making payments or collecting the certificates. The Indian postal department is selling NSCs and KVPs in electronic or dematerialisation (demat) form.

Don't get too excited. There is a catch. The facility, introduced in October last year in collaboration with the National Securities Depository Limited, is currently only available at 10 post offices in Mumbai.

It is in the pilot stage and will be available in another 25 post offices in Mumbai by the end of February. And in six months time there are plans to extend the facility nationally. Says Jui Tekale, inspector posts (training) & in-charge, "The idea is to avoid the use of paper and also give quick service to the customer."

At present, buying NSCs or KVPs takes a week or more. An investor contacts an agent or goes directly to a nearby post office, hands in a cheque (or cash or pay order) to a sub-post office, which is then routed to the head-post office.

The cheque is then sent for clearance to the clearing-house, which is the General Post Office, which in turn clears it through the RBI. The order to issue the certificate follows the same chain backwards, till the sub-post office finally issues the certificate to the investor, for which he/she has to wait in a long line again.

The biggest drawback of the physical paper system is that the investor has to make sure that the certificate is safe till the time of maturity, which is six years in the case of NSCs and eight years seven months for KVPs.

So how does the electronic system change all this? To start with, the procedure is fairly simple. All you have to do is fill an application form with your name, address, bank details, nomination details and submit them along with the amount to be invested at any of the 10 post offices offering the service.

Currently the Mumbai GPO, Dadar head office, Mumbai Central HO, Nariman Point HO, Kalbadevi HO, Ghatkopar post office, Rajawadi post office, Andheri HO, Motilal Nagar post office and Panvel HO fall in that list.

Once the application form is submitted, it is directed to a centralised nodal office (in this case it is Dadar HO since it is a fully computerised post office) which sends the details to NSDL and a demat account is created.

This takes three days and on the fourth day the customer gets a statement of transaction from NSDL at his/her residence instead of the certificates. "For the postal department it means a reduction in the paperwork and back office operations and a hassle free method of investing for the consumer," says a senior NSDL official.

The customer no longer has to worry about the theft or loss of the certificate because the record now exists in electronic form. The facility is available at no extra charge to the consumer and if you already have a demat account for shares, bonds and debentures, all your investments in NSC and KVP will be credited in the existing account. Otherwise a new account will be created in your name.

At the time of maturity, instead of having to run from pillar to post to get the money, a cheque or warrant of payment will be directly sent to your mailing address or directly credited into your bank account as per the details submitted in the form.

You can still buy certificates from agents and pledge certificates since the existing features of both NSC and KVP remain the same through the demat system as well. Even payment structures, modes of payment and income tax benefits remain unchanged.

So what's the catch? The facility is only available on new purchases of either schemes. So for all those people currently sweating it out in lines, there's no respite in sight.

They will have to wait a long time before the postal department and NSDL make it possible for existing certificate holders to be hooked on the system. Says Tekale, "We are looking at that also, but the volumes are so large it's going to take considerable time."

Apart from this, the success of the pilot depends entirely on the level of computerisation of each of the head post offices and sub - post offices.

Currently the ten that have been chosen to offer the facility have higher levels of computerisation than others. But once extended, it remains to be seen if the postal department can sustain the service given the lack of computerisation at most post offices.

The other minor difference between the paper and demat system is that where under the physical paper system, you could nominate more than one person, under the demat form nominations are allowed for only one person. So earlier if the maturity amount was divided in half between two nominees, now the entire amount can go to only one.

Despite these issues, which still need ironing out, the postal department is quite happy with the response the scheme has already received.

NSDL and the post department claim that already the invested amount through the demat form has crossed Rs 2.25 crore (Rs 22.5 million) in value. "And especially for those people who invest last minute in March, they will no longer be sent back due to a shortage of certificates as was the case earlier," says the NSDL official.

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