The Modi government has launched the ambitious Pradhan Mantri Jan Dhan Yojana for bringing banking services to the unbanked section of the country. India has 875. 49 million mobile phone subscribers as of October, 2013 but very few citizens have a bank account. Even after 68 years of independence not even 68% of Indian has access to banking. He said it is easy for the rich to get a loan at low interest rates. But the poor are forced to seek loans from money-lenders at five times the rate charged to the rich. This is a negligible figure for a nation which aspires to become the next super power.
Having a bank account in itself will drive financial inclusion across the country and provide affordable banking services to the unbanked section of the community. India has a large way to go when it comes to providing affordable banking services to its population but a start has definitely been made. The poor people were unable to open a bank account due to the lack of identity and address proof documents.
The cumbersome KYC norms were proving to be a hindrance for opening the accounts. Besides migrants were finding it difficult to open a bank account as they were unable to produce the temporary address proof even though they had a permanent address proof. Often banks used to disallow these people from opening accounts and they would ask them to produce the temporary address proof. The Modi govt had set a target of opening 10 billion bank through 60,000 camps organised by bank branches across rural India. The banks had been very aggressive in opening accounts.
The Pradhan Mantri Jan Dhan yojana is a mega financial inclusion plan under which bank accounts and RuPay debit cards with inbuilt insurance cover of Rs 1 lakh will be provided to crores of persons with no access to formal banking facilities. It will cover both urban and rural areas and those who open account would get Domestic Debit Card (Ru-pay card) include Rs 5,000 overdraft facility for Aadhar-linked accounts, inbuilt Rs 1 lakh accident insurance cover.
Phase-1 of PMJDY began on the August 28, 2014 and will last until August 14, 2015. The first phase will be focused on opening a bank account and providing credit facilities to those who are outside the banking system in urban and rural India. The second phase will start from 2015 till 2018. It will cover aspects such as micro insurance and pension schemes like ‘Swavalamban’. With the introduction of new technology introduced by National Payments Corporation of India (NPCI), a person can transfer funds, check balance through a normal phone which was earlier limited only to smart phones so far.
The ambitious scheme aims to bring poor people into the ambit of the Government’s financial programme. Industry welcomed the scheme and said implementation at the ground level will be the key to its success. It’s an innovative and much-needed step in the right direction that will address the biggest national challenge — eradication of poverty — through financial inclusion.
Reserve Bank of India governor, Raghuram Rajan nonetheless cautioned the banks to avoid the hasty implementation of Pradhan Mantri Jan Dhan Yojana. Rajan asked banks to avoid opening accounts to those who already have an account. He also said that in a hurry to open the bank accounts to meet the targets banks might end up opening accounts to the existing account holders who might avail the benefits of these accounts.