China's State Council has given the nod to a new Chinese bank to be known as the National Postal Savings Bank, which will be based on the existing savings deposit business at far-flung postal stations, a senior banking official revealed Wednesday.

Vice-Chairman Cai Esheng of the China Banking Regulatory Commission told a finance forum in Beijing the new bank will provide "basic services" to millions of rural dwellers.

Postal savings services were kicked off in 1986 with the establishment of the China Post Savings and Remittance Bureau (CPSRB). By the end of 2005, CPSRB had a deposit balance of 1.3 trillion yuan (about 162 billion U.S. dollars), making it the fifth largest savings institution just after the "Big Four" state banks.

CPSRB takes deposits from the public, which, however, can only flow to the central bank. Interest rate income from the deposits has been CPSRB's major source of profit amid the dwindling use of its traditional postal services.

An earlier government plan said the national postal system will be split into three parts: a post regulatory body, a postal service company and a postal savings bank.

According to Cai, the new bank will largely focus on retail and intermediary business, "forming sound, complementary relations with other commercial banks" to contribute to the development of the "new socialist countryside," a concept the Chinese government has raised amid efforts to boost rural development.

China had more than 28,000 financial institutions in the banking sector with total assets of nearly 40 trillion yuan by the end of April, figures show.

Cai said China's banking reforms are on a sound track, with supervision of the sector greatly enhanced, adding, however, it will take a long time for reforms to be completed.