It has the infrastructure and the reach to push financial inclusion in a massive way.
Since Independence, every move of the RBI has been aimed at development keeping in mind the welfare of the common man. In this connection, granting a banking licence to India Post will be a unique service to farmers, farm labourers and the rural poor, who feed the country but die of hunger.
The huge number of farmers’ suicides should prompt us to enable faster financial inclusion as only 35 per cent of the population holds bank accounts. India Post is the best equipped to take this on, with over 1,53,000 post offices spread across the country, located not more than 2-3 km from each village.
India Post has ready infrastructure, which can be quickly upgraded to meet the needs of a full-fledged bank branch in this age of solar power and satellite telecommunication. On the other hand, it would probably take decades for other applicants to open 1,53,000 branches.
Post offices already provide basic banking services such as savings and fixed deposits (NSC) and products such as Kisan Vikas Patra and Public Provident Fund which they will continue to do. They can spread the reach of other savings instruments such as government bonds, and tap the savings of the well-to-do in rural India for the development of the country as well as crop and healthcare insurance.


The most important factor for a depositor is trust, which post offices already enjoy, making them a safe investment destination. The only additional thing they need to do is perform the credit function. This can be undertaken by utilising the services of the credit staff of PSU bankers from nearby areas, or by hiring retired bankers for the first five years; by then they can train their own people.
As the postman is people-friendly, especially in rural areas, KYC compliance will be not be an issue and chances of fraud and misappropriation will be minimal.
The other issue to be addressed for enabling India Post to obtain a licence is technical since it’s a department of the government. This can be overcome by hiving it off with the required seed capital from the government.


Training the existing staff in lending and other banking operations can be taken care of in 18 months. With lower infrastructure development costs, post office banks will become profitable fast as establishment and fixed assets costs will be less.
Post office banks will be a unique model of financial inclusion. Mahatma Gandhi said: “India lives in her villages.” Yet this is a section we have discriminated against with respect to every facility. This is a chance to undo this injustice by making a new beginning.
Prosperity will reach every rural home when local skills, handicrafts and rural products get credit for development. Such banks will help in building infrastructure for storage and processing of perishable produce locally. Developing traditional supplementary vocations (dairy, poultry, fisheries, silkworm rearing) will help farmers put their spare time to use instead of wasting it. This massive penetration of banking services will help address the problem of farmers’ suicides. Enabling India Post and granting it a banking licence will be a real service to the nation.
(The author was chief manager, Bank of India, New Delhi.)