Conversion of India’s Post Offices into Banks

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Aug. 3 – An estimated 150,000 post offices across India will soon go through a fundamental modification, transferring them into full-fledged banks on the anvil. The initiative has been taken up by Telecom Minister Kapil Sibal, who wants to reach out to the masses in the country’s rural areas with modern banking facilities through the post offices.

A lack of contemporary banking facilities in rural areas and a growing dependence of villagers on informal establishments for their credit requirements has provoked the government to work on financial inclusion by way of establishing “postal banks.”

The post offices presently provide financial services like savings accounts, postal life insurance, pension payments and money transfer services. Its total amount is at Rs. 582,833 crore as of March 31, 2011.

The Postal Department’s revenues grew 11 percent to Rs. 6,954 crore in 2010-2011 from Rs. 6,267 crore in the previous fiscal.

On the other hand, negative growth in some circles has pushed the Department’s deficit to Rs. 6,625 crore in FY’11, almost equal to the yearly revenue of the Department.

Out of the 22 Postal Department circles, several have recorded negative growth – like Chhattisgarh for example at -19 percent, Jharkhand at -18 percent and North East at -15.9 percent. In contrast, Assam (+23.7%), Haryana (+19.5%), Karnataka (+13.5%) and Tamil Nadu (+13.9%), have all recorded positive growth.

The Minister has asked members of the Postal Services Board (PSB) to make sure 20 percent income growth is achieved on a sustainable basis.

Each member of the PSB has been asked to recognize, commercialize and operationalize five major schemes of the Indian government, and partner with 5 PSUs and 10 corporate houses for commercial tie-ups with India Post with revenue potential of at least Rs. 50 crore each.

The Postal Department is also supposed to be working towards setting up ATMs and bid debit cards for its customers.

According to officials, work for establishing up to 1,000 India Post ATMs is at an advanced stage and the Postal Department has already joined hands in parleys with vendors on this front.

The department is also offering skill development courses to its over 4.75 lakh employees with the Human Resources Development Ministry.

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