Eyes set on Post Office banks and liberalisation of sector

The government's plan to tap into India's vast postal system to reach out to the unbanked population by utilising offices across the country as banks is expected to take some shape this year as the proposal has been sent to the Finance Ministry for its nod.

The idea that 1.55 lakh Post Offices could double up as banks is aimed at aiding the government's goal of financial inclusion, especially in rural areas. Once implemented, coverage of the country's banking network will increase three-fold in one stroke.

Around 90 per cent of the Post Office branches are in rural areas. In contrast, out of approximately 87,000 bank branches in the country, around 24,000 are in rural India.

India Post is the biggest postal network in the world, a major portion of which, about 1.4 lakh post offices, are located in rural India.

Although the idea has been around for a while, Communications Minister Kapil Sibal brought it centre-stage in July. However, before it takes shape, the Acts governing the banking and postal sectors will have to go through major amendments.

"Before applying for a banking licence, there are certain procedures that need to be completed. The work is in progress and the proposal has been submitted to the Ministry of Finance for its nod to go ahead," a government official privy to the development told PTI.

The year may witness quite a few amendments to the 113- year-old Post Office Act, which are aimed at opening up the sector.

The proposed amendments in The Indian Post Office Act, 1898, include recognising the services of private courier players and bringing them under the regulatory ambit. This will legalise 'forbidden services' like sending personal letters through private courier companies.

However, a lot needs to be done within the Department of Posts before reforms are implemented in the sector, as the industry is demanding that the services wing of the DoP should be a separate entity. This could be done along the lines of BSNL, which was hived-off from the Department of Telecom, industry players have said.

During 2011, Sibal made efforts to kick-off reforms in the sector, starting with India Post.

"After many years, we have seen government is ready to listen to industry. Minister (Sibal) has said that no policy decision will be made without taking views of industry. It's a highly welcome move, but DoP officials are still not ready to open up," said an industry representative.