All Post-offices To Be Connected to Core Banking System in 2022

Moneylife Digital Team 01 February 2022

Economy & Nation

In a major boost to digital banking, Union finance minister (FM) Nirmala Sitharaman announced that all 150,000 post-offices in India would be connected to the core banking system. If this works, it will enable people to access their account online. It will be possible to transfer money within post offices and also from post office accounts to other bank accounts through net banking, RTGS (real-time gross settlement) and NEFT (national electronic fund transfer). This will promote financial inclusion and will be a big boost for farmers and the rural economy.

Core banking for post-offices has been on the wish list of the common man for many years and it is finally coming to reality now. As of now, people have had to use the cheque book every time they need to transfer funds between post offices or between the post office and banks. The transfer process is slow and often takes four to seven days, which will be cut to less than an hour once netbanking is enabled.

Core banking—when unrolled in post-offices—is expected to provide faster and easier banking services, through internet, mobile devices and ATMs.

A few years back, post-offices unveiled limited core banking using Post Office Core Banking Solution (CBS). Post offices were linked with each other but the real core banking feature was sorely missing.

Currently, post-offices provide savings account services and payments bank services through the India Post Payments Bank (IPPB). While the payments bank part (which was launched a few years back) is on core banking, the traditional savings account services are not.

To get around this technological constraint, in the past couple of years, many people in metro cities had hit on a jugaad idea (hack) to operate their post-office savings accounts from home. They would link their post office savings accounts to their India Post Payments Bank (IPPB) accounts and arrange for auto transfer to the IPPB accounts, so that they could operate their accounts through the mobile app DakPay. With the launch of the new core banking in post offices, they will not have to resort to gaming the system in this way.

The FM stressed, while presenting the Union Budget 2022, that this Budget focuses on financial inclusion.

"All 1.5 lakh post-offices in India will be brought under the core banking system. This will enable financial inclusion and access to accounts through net banking, mobile banking, ATMs, and also provide online transfer of funds between post office accounts and bank accounts. This will be helpful especially for farmers and senior citizens in rural areas, enabling interoperability, and financial inclusion," Ms Sitharaman said during her Budget speech.

Banking experts have unanimously hailed the move, saying that this enablement of net banking and fund transfer for Indian Post will encourage interoperability and enable better financial inclusion. This will be a big push for the digital economy in rural India.

In recent years, digital banking, digital payments and fintech innovations have grown at a rapid pace in the country. The government is continuously encouraging these sectors to ensure that the benefits of digital banking reach every nook and corner of the country, in a consumer-friendly manner. Taking forward this agenda, and to mark 75 years of our Independence, it is proposed to set up 75 digital banking units (DBUs) in 75 districts of the country by scheduled commercial banks (SCBs).

The financial support for the digital payment ecosystem, announced in the previous Budget, will continue in 2022-23. This will encourage further adoption of digital payments.

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