India’s Post Bank gets March 2017 green light
India’s Post Bank is to begin processing payments in March 2017, according to the government’s communications minister. The move is part of long-standing plans to use India’s Post Office network to spread financial inclusion in the world’s largest democratic nation.
India has over 600,000 villages, many of which don’t have access to banking services. Spreading those services to the rural population is seen as a major means of boosting wealth and economic growth. The post office is seen as a viable provider, since an estimated 230 million people in India already hold a savings account with the post office, which runs a network of 155,015 outlets across the country, of which 1,39,144 are in rural areas. It also already plays a significant role in handling India’s estimated $71 billion in annual remittances, according to figures provided by the World Bank.
Speaking during a conference on governance last week, Ravi Shankar Prasad, union minister for communications and IT confirmed the March start date and noted that various financial institutions including Deutsche Bank and the World Bank have expressed interest in partnerships with Post Bank, although nothing is confirmed yet.
The Post Office had originally planned to start offering banking services in March 2014, but those plans were set back in February of that year when the government released a budget that did not allocate the necessary funds for the project to go ahead. The finance ministry opposed the plans at the time on the grounds that the Post Office didn’t have the necessary expertise to become a bank. However, the Reserve Bank of India eventually released guidance in favour of the plans.
Post Bank will operate as a subsidiary of India Post, which has already run several pilot schemes in Assam, Uttar Pradesh, Rajasthan, Maharashtra, Karnataka and Tamil Nadu to test its core banking abilities. It is estimated that 41% of India’s 1.2 billion population is currently unbanked, rising to 61% in rural areas, according to figures provided by the World Bank.