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Paving way for over 1.5 lakh post offices to offer banking and insurance services, especially in the hinterland, the government will soon make amendments to 'The Indian Post Office Act, 1898'.
"The draft amendment bill to make necessary changes in 'The Indian Post Office Act, 1898' has been circulated by the Department of Post for enabling post offices to enter banking and insurance sector," a source privy to the development said.
He further said, "The Planning Commission is vetting the proposal to convert post offices across the nation into full fledged banks and provide insurance service."
Besides mail service, post offices in the country have broadly confined their business to offer financial services like savings bank, postal life insurance, pension payments and money transfer services.
The Department of Posts (DoP), which has the largest reach in the country, has diversified in recent times with providing facilities like rail reservation and telephone recharge coupons, but this move will substantially improve its basket of services.
The government, according to the source, wants to completely give a new dimension to the way post offices do business in the country and this Bill is a step towards that goal.
With this initiative, the Department of Post (DoP) wants to tap the vast rural market with modern banking facilities through post offices.
"We want to commercialise the department. We will seek a licence from the RBI to convert all our post offices into banks," Telecom Minister Kapil Sibal had recently said.
The lack of modern banking facilities in rural areas and dependence of villagers on informal sector for their credit requirements have prompted the government to work on financial inclusion by way of setting up 'postal banks'.
"The State Bank of India can't build branches all over India, but there are post offices across India. The branches are already there, so infrastructure expenditure is not required. So you can actually give banking facilities at relatively lower costs, which would be extremely beneficial to people," he had said.
This will also pave the way for the DoP to offer ATM services and debit cards to its customers.