Bank inclusion drive gets festive opening
Aug 28 2014 , New Delhi
Jan Dhan Yojana kicks off with 1.5 cr accounts
The government has chosen the PM's Jan Dhan Yojana (PMJDY) to demonstrate its seriousness about ending financial untouchability, getting rid of poverty and providing insurance to a wider population.
The project has been launched on the eve of the NDA government’s 100 days in office.
“This is a big financial empowerment weapon in the hands of the poor -- to have a formal bank account,” said Modi while launching the scheme on Thursday in the capital.
PMJDY originally envisaged opening of 7.5 crore bank accounts by August 15 next year. However, having witnessed massive response to his independence day announcement, Modi asked banks and financial institutions to advance the deadline by six months to January 26, 2015.
Account holders will not only be eligible for Rs 1 lakh accident insurance but they would also be given a 'RuPay' debit card along with Rs 30,000 life insurance cover.
The finance ministry has roped in private and public sector banks, insurance companies and payment gateway companies to handle this massive operation.
While National Payments Corporation of India (NPCI) provides the debit card cover, LIC has been enlisted for life insurance cover while HDFC Ergo would cover the accident insurance claims.
On the first day itself, the government was successful in enrolling about 1.5 crore families with bank accounts through more than 77,852 day-long camps in over 20 states. Pointing to huge number of accounts opened, Modi said, “Let’s celebrate today as day of financial freedom.”
Even private banks have partnered with the government in drawing in new account holders. For instance, ICICI Bank has opened one lakh new accounts on the first day of the launch through 3,700 branches that cover over 15,600 villages.
The government has roped in state chief ministers, members of parliament and legislators from different political parties in this initiative.
The prime minister said that over 68 per cent people who have no access to full banking and financial services have been targeted by the scheme.
Apart from the savings account, accident insurance cover and ‘RuPay’ debit card, the government would provide overdraft facility for account holders up to Rs 5,000 after having monitored the transactions for the first three months.
During the second phase, the government would set up credit guarantee fund to cover any possible defaults in the overdraft accounts, provide micro-insurance cover and deposit pension fund proceeds from schemes like ‘Swavalamban’.
In the third phase, the government would move ahead to provide all the subsidy benefits on food, oil and fertiliser worth $48 billion doled out annually directly into beneficiaries' bank accounts. It will also include subsidy payments on cooking gas and payments from the revamped rural job guarantee scheme to create durable assets.
Modi said women would be prioritised in opening bank accounts in about six lakh villages that would be mapped through banking correspondents and ‘gram dak sevaks’ (village postmen) to take government schemes to people.
Referring to nationalisation of banks in 1968, Modi pointed out that over 40 per cent people still did not have access to formal banking, which goes against the spirit of nationalisation.
He also pointed to over five times interest paid by poor people on loans, as against their richer counterparts. “This has to change,” said Modi.
While maintaining that financial inclusion was the responsibility of his government, the prime minister hinted at possibility of increase in savings after bank accounts were opened.
Modi also narrated an incident in his life where Dena Bank officials were tracking him for 20 years to close his bank account. “There was a time when people tried to close bank accounts. Now, we are making efforts to open new accounts,” Modi said.
Through PMDJY, the government proposes to expand banking services through 7,000 new branches and 20,000 new ATMs. But, the biggest challenge for implementing the scheme is lack of telecom coverage in over 50,000 villages thereby denying any communication with people in these areas.
It is expected that the prime minister will directly monitor progress of the financial inclusion drive, seen as his pet project, to take governance to people’s doorstep.