It was set up by the colonial government to provide banking services for lower-income citizens within the Straits Settlement.

To develop the infrastructure of the infant city-state, Minister for Finance Goh Keng Swee set up a savings bank committee, which was later reconstituted into a permanent advisory committee within the bank to promote domestic savings through POSB to provide the Singapore government with a non-inflationary source of funds for the development of the country.

[8] Savings competitions were also organised among all public and government-aided schools to encourage students to open an account with the bank.

[11] In 1974, the bank was transferred to become part of the Ministry of Finance and Credit POSB Pte Ltd was established in the same year to provide custom-tailored loans relating to HDB housing ownership.

[12][13] In 1983, its headquarters were shifted to the new 8-storey complex, the POSB Bank Centre at Bras Basah Road.

It attempts to continue this tradition by promising to keep costs low for basic savings accounts, and to exempt children, full-time students below the age of 21 years.