The Union Cabinet, on Wednesday, has cleared the proposal to set up the India Post Payment Bank at a project cost of ₹800 crore.


This revolutionary decision will facilitate personal banking at local post offices and the trusted postmen will now aid mobile banking, especially in rural India. The bank will be operational from March 2017 and will cover the entire country by the end of next year.

In an interview to NDTV, Communications and IT Minister Ravi Shankar Prasad said, "By March 2017, we will launch the postal department payments bank  It's going to be a game changer. There are 1.54 lakh post offices and our network will be the largest in the world. Even bigger than the State Bank of India."


He added, "Top 50 international and Indian companies including Barclays and others are interested in partnering with India Post for third party delivery services for insurance and banking. We are in talks and a huge matrix will be created." 


The postal bank aims to penetrate deeper into rural India via rural postal branches. In the first phase, 650 payment bank branches will be set up. The initial target was to create a working framework within three years but at the cabinet meet held on Wednesday, PM Narendra Modi asked the minister to complete the project by September 2017.


The postal department will integrate the already existing 1.7 lakh postmen and other ground postal staff into the banking project. The plan is to equip the ground staff with 1.3 lakh handheld devices to provide mobile banking services in rural India. A proposal to provide tablets and even smartphones to these postmen has been put forward.

The government has sanctioned ₹400 crore as equity and a similar amount will be cleared as grant. To popularise India Post Payment Bank, the department aims to install 5,000 ATMs in the country.

The India Post Payment Bank will also handle payments of central and state governments, municipal dues and university fees.