Your neighbourhood post office could shortly double up as a commercial bank. It could sanction personal loans and offer investment options in mutual funds, insurance schemes and government securities, all under one roof.

Though there is no official decision yet, the department of posts is discussing the proposal internally. In case the proposal is cleared by the department, it will approach the finance ministry with a formal plan to be allowed to lend to individuals and corporates.

If the finance ministry clears the plan, the department will have to apply to the Reserve Bank of India for a banking licence. The Life Insurance Corporation of India, too, had considered seeking a bank licence but did not proceed with the plan.

"It will be logical for us to convert India Post into a full-fledged bank, providing banking and value-added services to customers," said U Srinivasa Raghavan, member (development), Postal Services Board.

A similar idea was mooted by the deputy chairman of the Planning Commission, Montek Singh Ahluwalia, who recently said India Post should have a subsidiary bank to complement its functions.

With a Rs 1,364 crore (Rs 13.64 billion) deficit in 2002-03, the department believes the government will not be willing to subsidise its operations for long. It would be logical for the department to earn extra revenue from the finance functions, which could be used to subsidise mail delivery and services undertaken as part of its social obligations, said a senior postal department official.

The proposal has gathered momentum after the success of the Postal Finance Marts, which were started as an experiment at seven locations in Tamil Nadu. Targeted at the young and the upwardly mobile, these marts, with modern ambiance, have become a one-stop shop for all financial products.

"We will go ahead alone in areas like savings bank and insurance, where we are strong. In segments that are new for us, we will forge partnerships with other players," Raghavan said.

In mutual funds, India Post has tied up with companies like UTI, SBI MF, Principal and ICICI Prudential for retailing.

A similar distribution deal for non-life insurance products with Oriental Insurance is also in place. The department is close to finalising a deal with a private player for selling government securities. India Post is also drawing up a plan to offer financial advisory services.

Officials said the charges would be competitive because private banks charged higher fees and offered some services only to high net worth individuals.

Raghavan is of the opinion that the marginal cost for the diversification into banking would be low because the department already had a vast infrastructure of over 155,000 post offices across the country.

The post office savings bank has over 160 million depositors and collects Rs 78,000 crore (Rs 780 billion) in deposits a year. In the insurance segment, the Postal Life Insurance scheme is the second largest with 276,880 policies issued in 2003-04 for a sum assured of Rs 2,846.65 crore (Rs 28.466 billion).

The Rural Postal Life Insurance scheme has witnessed 10-fold growth with the sum assured rising from Rs 585.83 crore (Rs 5.858 billion) in 1999-00 to Rs 5,950 crore (Rs 59.50 billion) in 2003-04.

Financial behemoth Services it already provides The post office savings bank has 160 million depositors The bank collects Rs 78,000 crore in deposits a year Postal Life Insurance scheme issued 276,880 policies in 2003-04 for a sum assured of Rs 2,846.65 crore. Investment options on offer India Post is selling UTI, SBI MF, Principal and ICICI Prudential mutual funds It is also selling Oriental Insurance's non-life insurance products ... and in the works India Post is looking at a distribution deal for gilts It is also planning to offer financial advisory services