In a recent meeting chaired by Prime Minister Narendra Modi, the Department of Posts (DoP) said that it is ready to move into the banking space by becoming a universal bank, sources said.

According to a presentation given to the Prime Minister, DoP, in consultation with the government, may approach RBI this month to consider its original application for a universal bank, the source said.

"Simultaneously, modalities for the alternative of taking the legislative route to set up Postal Bank of India (PBI) would be worked out in February," the source said.

The meeting, which was also attended by Communications and IT Minister Ravi Shankar Prasad, discussed the proposals of the 'Task Force on Leveraging the Post Office Network' and the way forward to implement the recommendations.

The Reserve Bank of India (RBI) in August last year said that the Union government has to take a final call on application for banking licence by DoP.

The sources said to begin with, DoP proposes to have Post Office Savings Bank (POSB) to run parallel to the PBI, which can eventually become part of the PBI as suggested by the Task Force.

The source said post offices as front of PBI shall offer full banking services to the customers whereas PBI branches shall only handle the back office operations such as processing of loan applications, credit worthiness and risk assessment, investment operations etc.

"PBI will also offer the facility of opening institutional accounts, like for panchayats, micro credit agencies, along with new schemes and market linked rates," the source added.

Modi had set up the Task Force in 2014 to leverage the postal network in India and to enhance the role of India Post in financial inclusion, among other services like delivery of goods for eCommerce firms.

In December last year, the Task Force had submitted its report to Prasad. It noted that with its Rs 6 lakh crore in deposits, India Post is second only to the country's largest bank SBI.

The report suggested that the government should set up a holding company under the DoP for immediate roll out of banking, insurance and e-commerce services.

The holding company should have five different verticals, and three of them - banking, insurance and e-commerce - can start working immediately.

The panel had suggested establishing PBI as a separate entity with a branch in each district in the first three years with initial capital of Rs 500 crore to be funded by the government.

PBI and Prime Minister's Jan Dhan Yojana can compliment each other for financial inclusion, former Cabinet Secretary TSR Subramanian, who headed the task force, had said.

Latest News from India News Desk