With a plan to enlarge the reach of financial services to the customers at the last mile, Finance Minister Nirmala Sitharaman in her Union Budget 2022, announced connecting the 1.5 lakh post offices to the core banking system. She also announced a plan to establish digital banking units (DBUs) by scheduled commercial banks in 75 around districts of the country, to mark 75 years of Independence.
Finance Minister’s announcement in Budget 2022 India
As per the Budget speech of FM Nirmala Sitharaman, in the year 2022, 100 percent of 1.5 lakh post offices have been planned to come to the core banking system; this will empower financial inclusion and will provide the customers with access to their accounts through mobile banking, net banking, and ATMs. This facility would also provide online fund transfer services between the post office accounts and other bank accounts.
Target beneficiaries as stated in Union Budget 2022
FM Nirmala Sitharaman clearly stated that this initiative would be helpful particularly to the farmers and senior citizens residing in the rural areas and empower them with interoperability, easy fund transfers, and financial inclusion benefits. Presently the post offices offer savings account services and payments bank services through India Post Payments Bank.
Benefits envisioned through this integration:
This initiative of Union Budget 2022 would deepen financial inclusion and boost the digitization process in banking services. The customers would have better access to their accounts using mobile banking, net banking, and ATMs, facilitating the online transfer of funds between post office accounts and other bank accounts.
This remarkable move to connect all the post offices in India to the core banking system will permit a major fraction of the population, particularly those living in rural and remote areas, to access their accounts and carry out online money transfers at their post offices. This development would help in reducing the distance between the urban-rural economies.
Financial services currently provided by India Post:
Presently the financial service provided by the Post office incorporates savings accounts and some insurance services like Rural Postal Life Insurance (RPLI) and Postal Life Insurance (PLI). The small savings scheme of the Post office gives a risk-free, secure, and attractive investment choice to the small investors and offers savings products and services through its chain of 1,55,000 Post offices spread across the country.
It’s noteworthy that the Post Office savings bank is the oldest and the largest banking system in India, which serves the investment requirements of both urban and rural customers. These services are a form of agency service offered by the Ministry of Finance, Government of India. Several other products and services like India Post Payments Bank, Money Remittance Services, Mutual Funds, and Forex Services serve the different investment requirements of a large population.
What do the reports say?
According to the 2020-21 annual report of the India Post, the core banking solution is part of the information technology modernization project undertaken by the department. As of 31 December 2020, around 23,477 post offices have access to the core banking system (CBS) platform. In December 2020, News agency PTI had reported that by April 2021, India Post expects to make the post office savings bank services carry out inter-operations with other bank accounts and plans to focus on improving the digitization of all their services in the year 2021.
Experts after analyzing the Budget 2022 India believe that bringing all the post offices beneath the domain of the core banking system would greatly help the depositors access online banking services and other infrastructure like ATMs, similar to the services offered by other conventional banks.
Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.
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