The Post Office will also increase its lending substantially, aiming to double the value of its mortgage book in the financial year 2010/11.
The move comes as Business Secretary Lord Mandelson announced a major expansion of the financial services offered by the Post Office.
It is part of a drive to put banking back into the heart of communities and making the Post Office network of 11,500 branches more sustainable.
He also announced £180m of new funding for the Post Office.
Publishing the Government's response to its consultation on Post Office banking, Lord Mandelson said: "Since the global banking crisis we have set about reinventing the financial services industry piece-by-piece, building a system that is fairer, trusted and more responsible.
"Today is the next step in that process. The Post Office is a well-loved community institution and this move will bring more banking services back to the heart of those communities."
Business minister Pat McFadden said: "The Post Office can provide a range of good value, simple financial products for everyone. These are the clear messages that people have given us and we are acting on them - a major step towards making the Post Office a sustainable neighbourhood banking service."
