Understanding the Income-to-Cost Ratio (ICR) of a Branch Post Office
For the growth, sustainability, and financial strength of India Post, every Branch Post Office (BO) is expected to maintain a minimum Income-to-Cost Ratio (ICR) of 33.33%.
But what exactly is the Income-to-Cost Ratio, and how is it calculated?
This guide explains the concept in a simple and structured manner with practical examples.
What is the Income-to-Cost Ratio (ICR)?
The Income-to-Cost Ratio (ICR) indicates how much income a Branch Office generates compared to its operating expenses.
Formula
Income-to-Cost Ratio (%) = (Total Monthly Income ÷ Total Monthly Cost) × 100
Example
- Total Monthly Income = ₹10,563.36
- Total Monthly Cost = ₹44,306.44
ICR = (₹10,563.36 ÷ ₹44,306.44) × 100 = 23.84% (approximately)
Since the required benchmark is 33.33%, this Branch Office needs to improve its revenue generation.
Sources of Branch Office Income
The income of a Branch Office is calculated from various postal products and services.
1. Stamp and Stationery Sales
When stamps and stationery are sold, the entire sale value is not treated as income.
Calculation Method
- 40% (2/5) of the total sales value is taken as revenue.
- An additional 20% of that revenue amount is also added.
Example
- Total Stamp & Stationery Sales = ₹128.75
= ₹51.50
= ₹10.30
Total Revenue
₹51.50 + ₹10.30 = ₹61.80
Key Takeaway
Higher stamp and stationery sales directly increase Branch Office income.
2. Money Order Revenue
Revenue is calculated from the commission earned on Money Orders.
Money Orders Issued
Revenue = 24% of commission earned
Example
- Commission Earned = ₹192.50
Revenue = 24% × ₹192.50
= ₹46.20
Money Orders Paid
Revenue = 38% of commission earned
Example
- Commission Earned = ₹927.50
Revenue = 38% × ₹927.50
= ₹352.45
Total Money Order Revenue
₹46.20 + ₹352.45
= ₹398.65
Key Takeaway
Increasing Money Order transactions contributes directly to Branch Office income.
3. Indian Postal Orders (IPO)
For Indian Postal Orders sold:
- 40% (2/5) of the commission earned is taken as revenue.
Example
If no IPOs are sold during the period:
Revenue = ₹0
4. Post Office Savings Bank (POSB) – The Largest Income Contributor
POSB accounts contribute the largest share of Branch Office income.
Revenue from Live POSB Accounts
Each live POSB account contributes:
₹67.97 per year
Example
- Live POSB Accounts = 1,733
Revenue = ₹9,816.00
Revenue from Silent POSB Accounts
Each silent POSB account contributes:
₹11.05 per year
Example
- Silent POSB Accounts = 198
Revenue = ₹182.33
Total POSB Revenue
₹9,816.00 + ₹182.33
= ₹9,998.33
Key Takeaway
POSB contributes the largest portion of Branch Office income.
To improve ICR:
- Open more POSB accounts.
- Reactivate silent accounts.
- Encourage customers to use savings bank services regularly.
5. Other Agency Functions
An additional revenue equal to 1% from other agency functions is also considered.
Example
Revenue = ₹104.59
Total Monthly Income Calculation
| Income Source | Revenue (₹) |
|---|---|
| Stamp & Stationery | 61.80 |
| Money Orders | 398.65 |
| Indian Postal Orders | 0.00 |
| POSB Accounts | 9,998.33 |
| Other Agency Functions | 104.59 |
| Total Income | 10,563.36 |
Monthly Operating Cost
Every Branch Office has fixed monthly expenses.
| Expense Head | Amount (₹) |
|---|---|
| BPM Salary | 28,250.00 |
| ABPM Salary | 15,800.00 |
| Stationery Charges | 250.00 |
| Printing & Audit Charges | 6.44 |
| Total Cost | 44,306.44 |
Income-to-Cost Ratio Analysis
| Particulars | Amount (₹) |
|---|---|
| Total Monthly Income | 10,563.36 |
| Total Monthly Cost | 44,306.44 |
| Income-to-Cost Ratio | 23.84% |
Expected Benchmark
Minimum ICR Required = 33.33%
Current Position
The Branch Office is achieving only 23.84%, which is below the departmental benchmark.
How to Improve the Income-to-Cost Ratio?
To achieve and exceed the target of 33.33%, Branch Offices should focus on:
✓ Increasing POSB Business
- Open new POSB accounts.
- Reactivate silent accounts.
- Promote recurring deposits and savings products.
✓ Boosting Stamp & Stationery Sales
- Encourage customers to purchase stamps and stationery from the Branch Office.
✓ Increasing Money Order Transactions
- Promote Money Order services where applicable.
✓ Expanding Postal Transactions
- Encourage greater use of postal and agency services.
✓ Improving Customer Outreach
- Conduct awareness campaigns and customer visits.
- Identify potential customers for postal savings products.
Conclusion
When reviewing an Income-to-Cost Ratio statement, do not focus only on the final percentage. Instead, analyze the income sources contributing to the revenue.
The example clearly shows that POSB accounts contribute the largest share of Branch Office income, making them the most effective tool for improving ICR.
More POSB accounts, more stamp sales, more money order business, and more postal transactions will directly improve the Income-to-Cost Ratio and strengthen the financial sustainability of every Branch Post Office.
A stronger Branch Office means a stronger India Post. 🇮🇳📮
Updates:
Follow us on WhatsApp, Telegram Channel, Twitter and Facebook for all latest updates
Post a Comment