The Department of Post (DoP), which also provides savings bank services to millions of Indians, is planning to launch a full-fledged bank under the name of Post Bank of India.
Minister of State for Communications and IT Shakeel Ahmed in Kolkata on Saturday that his ministry had initiated talks with the finance ministry in this regard.
He said there are 1,55,000 post offices in the country with a major presence in the rural areas. The financial services division of the post department has 162 million account holders and is currently managing funds worth Rs 37,500 billion, Ahmed said.
The postal network offers a number of financial services but passes on the entire money collected to the finance ministry for a fixed commission. If the post department hives off the financial services arm as a full-fledged banking unit, then it will be able to keep the money collected and take investment decisions.
Ahmed said the concerned ministries were working on the functioning and regulatory mechanism of the proposed entity.
"We will have to sit with the finance ministry and RBI (Reserve Bank of India) to formulate the modalities of the operation of the proposed entity," he said.
DoP has launched a number of financial services, including a money transfer facility through a tie-up with Western Union.
Financial services have been contributing a major chunk of the department's revenues and are offering relief at a time when it is reeling under accumulated losses of about Rs 10 billion, recorded last year.
The DoP has also taken up with the finance ministry the issue of lower interest rates for post office products as compared to those of banks, Ahmed informed.
As part of plans to revive the DoP Rs 60 billion will be invested with the 11th Five-Year Plan to technologically upgrade and connect post offices with a centrally placed data centre, the minister said.
The government has also removed the ban on recruitment of manpower and opening of new post offices imposed in the last Five-Year Plan, he said.
Ahmed was in the city on the occasion of the launch of a tie-up between HDFC Bank and the West Bengal Circle of DoP.
As per the tie-up, HDFC Bank will offer loans against postal securities such as National Savings Certificate (NSC) and Kisan Vikas Patra in the state.
HDFC Bank's regional head (east) Madhusudan Hegde said the arrangement will strengthen the bank's presence in the rural region.
In the eastern region HDFC Bank is targeting around Rs 70 billion of deposits and Rs 69 billion of advances in the current fiscal.