According to World Bank estimates, only 35% of India’s adult population have a bank account.Financial Inclusion means taking steps to ensure that banking and other financial services are made affordable, easy and available to the poor. In the year 2012, Institute of Banking & Finance (TKWs Group) had conducted a Bankers Meet to discuss financial inclusion in sectors like Banking, Share Markets, Mutual Funds, Insurance, etc. Honb. Prime Minister Sh. Narendra Modi has launched the most ambitious financial inclusion plan on 28 August 2014, called JAN DHAN YOJNA. In this story, we discuss the important highlights of this effort to remove “Financial Untouchability”.
1. Shift in focus from Villages to Households
The new policy aims at opening atleast 1 bank account per household in both urban and rural areas. While, traditionally financial inclusion programs only focussed on opening branches in unbanked rural villages.
2. Insurance, Plastic Money and Loan for every Indian
This special ‘Zero Balance’ account will come with a RuPay debit card and an accident insurance cover of Rs 1 Lakh. Further, if the account is opened before 26 January 2015 an additional life insurance cover of Rs 30,000/- will be given to the account holder. After 6 months of opening the account, the beneficiary will also become eligible for an over draft facility of Rs 5,000/-.
3. World record made in India
First time in the history of economics of any country of the world, 1.5 Crore people opened a bank account as well as insurance policy in a single day. A total of 7.5 Lakh bank employees worked across bank branches and 77000 camps specially setup for this day.
4. Every Indian will become Richer in 10 Years
The nationalisation of banks in 1968, led to an increase in domestic savings rate from 13% to 21% over the next decade. If poor India starts saving in banks, thousands of Crores of liquidity can be pumped back as investments, making every one richer. Also the poor can be saved from loan sharks giving more disposable income in their hands.
5. Who will pay the bill
National Payment Corporation of India (NPCI) will pay Rs 1/- per person for accident insurance to HDFC Ergo, where as government will pay Rs 90 per person for life cover to LIC. The bank has to bear the cost of account opening on itself. The question remains, who will pay for the loss if Rs. 37,500 Cr given as over draft becomes NPA?
6. High risk of failure, if the loose ends are not tied
Questions are being raised due to relaxed KYC norms. Were these 1.5 Cr accounts opened only by unbanked families? Will these accounts translate into transactions or remain dormant? Will people use it correctly in absence of financial literacy? Linking of Aadhaar card and payment of all subsidy through these accounts could be possible solutions. So the ultimate success lies not in opening the accounts but in making them usable.
The author Amit Goyal is the Director of Institute of Banking & Finance, New Delhi. The institute prepares students to become next generation bankers through undergraduate and post graduate courses. Institute of Banking & Finance is promoted by TKWs Group. The author can be contacted at firstname.lastname@example.org