Jan Dhan Yojna
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Government collects Rs 1.16 lakh crore under Jan Dhan Yojana Tuesday, 30 December 2014 - 7:30am IST | Place: Mumbai | Agency: dna dna money 187 Shares Facebook Twitter Google+ Reddit Comments Total of 5.8 million accounts registered under Pradhan Mantri Jan Dhan Yojana till September 2014; PMJDY and financial inclusion programme created 8.8 million accounts
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Government collects Rs 1.16 lakh crore under Jan Dhan YojanaTuesday, 30 December 2014 - 7:30am IST | Place: Mumbai | Agency: dna
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Total of 5.8 million accounts registered under Pradhan Mantri Jan Dhan Yojana till September 2014; PMJDY and financial inclusion programme created 8.8 million accounts
The Pradhan Mantri Jan Dhan Yojana (PMJDY) has collected Rs 1,16,500 crore in savings in the first half-year
period ending September 2014, registering about 5.8 million accounts, according to the data put out by RBI in
its Financial Stability Report released on Monday. The PMJDY project may be replicated to include the provisions of
insurance and pension services for the common man. PMJDY and the financial inclusion programme together have
created 8.8 million accounts with outstanding balance of Rs 1,16 500 crore until September 30, 2014.
Banking outlets, which includes ATMs, bank branches and business correspondents, increased by 62,948 in the first
half year period up to September 2014, taking the total banking outlets to 446,752 resulting in higher transactions
during this period.
As a result of these initiatives, RBI said more bank finance flowed into the rural segments. The Kisan credit cards,
which reflect the flow of credit towards farm sector entrepreneurial activities, increased by 1.2 million transactions
during the half year and general credit cards used for non-farm entrepreneurial activities, increased by 1.3 million
transactions.
RBI adviced banks that while offering the overdraft facility of Rs 5000, they will need to follow proper due diligence
and satisfactory operations in the account for six months. The accounts will also have an accident cover.
A senior official, who is in charge of financial inclusion in his bank, said, "Howevergovernment has added riders for
all the benefits. For example, if the insurance money is to be claimed then the Rupay card has to be swiped at least
once in the past 45 days. The account has to be opened in the name of the head of the family only then are they
eligible for insurance. So have to now undertake a lot of due diligence."
RBI along with the banks have been implementing the financial inclusion programme in the unbanked areas from
2010. The accounts opened were called basic savings and basic deposit accounts, which were essentially zero
balance and no frills accounts. The timeline for providing banking services to villages with a population of 2000 under
the road-map may be advanced to August 2015 from the earlier date of March 2016.
Banks open 10 cr Jan Dhan Yojana accounts but 75% have no money in
themby FP Editors Dec 29, 2014 11:33 IST#DBT #finance ministry #HowThisWorks #Jan Dhan Yojana #LPG #PMJDY #Subsidy #zero balance accounts
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There's no surprise here. The number of bank accounts opened under the Prime Minister's Jan Dhan
Yojana (PMJDY),Narendra Modi's ambitious financial inclusion programme, has breezed past the
government's target much ahead of time.
According to the data available on the PMJDY website, banks have opened as many as 10.09 crore
accounts accounts as of 26 December. Of this, 8.03 crore accounts have been open by public sector
banks, 1.8 crore by regional rural banks and a minuscule 27.13 lakh by private sector banks. The
total balance in the accounts stand at Rs 7,778.42 crore.
And of the total accounts, nearly 75 percent, or 7.41 crore, have no balance.
That the government-set target will be met and also surpassed well before the deadline was a
foregone conclusion given the fever pitch with which the banks were opening accounts as they were
under immense pressure from the government to make the programme a success.
Reuters
While launching the scheme the prime minister had set a target of 7.5 crore accounts by 26 January.
In order to make the account opening easy, some of the norms were also relaxed. The Reserve Bank
of India had given a six-month leeway for low-risk customers to submit their KYC documents to open
the accounts. As the banks stepped up opening of the accounts, the government also raised the bar
by increasing the target to 10 crore accounts by 26 January.
In fact, the government is eyeing an entry in the Guinness World Records for opening maximum
number of bank accounts in the least time.
As Firstbiz had earlier reported, "bankers were put at gun point to meet the targets, in turn, forcing
them to offer accounts to everyone on the street, who meet or do not meet minimum KYC
requirements".
Many bankers, on the condition of anonymity, had even expressed their apprehensions about the
scheme as, in their desperate bid to meet the target, they were conveniently forgetting the know your
customer norms.
The finance ministry, meanwhile, has highlighted PMJDY as one of its biggest achievements in the
past six months. According to a PTI report, the other achievements listed by the ministry include
Varishtha
Pension Bima Yojana (VPBY) and actions taken to curb black money.
"As on December 1, states of Goa, Kerala, Tripura and Madhya Pradesh, Union Territories of
Chandigarh, Puducherry and Lakshadweep have achieved 100 per cent Saturation (all households
with at least one bank account)," the report said citing a press release.
While financial inclusion is a much needed policy initiative to weed out poverty and bring the
unbanked under formal banking, what is raising concern is the pressure being put on the banks.
Moreover, as is visible in the above statistics, there is an unfair burden on public sector banks which
is likely to affect their profitability and also result in rampant misuse of such accounts by hawala
operators.
Such fears apart, one good thing about the scheme would be that these accounts will be helpful in
successfully rolling out the direct benefit transfer (DBT) of cash subsidies. The government started
DBT for LPG on 15 November in 54 districts. From 1 January, it will be launched all over the country.
Eventually, the plan is to bring all subsidy schemes, including food subsidy and NREGA, under DBT.
That would mean all the Jan Dhan accounts will see cash transfers, making all of them operational
and helping banks break even these accounts.
Until such time, however, banks will have to bear the burden.
Jan Dhan Yojna next stage of social, economic development'PTI Aug 15, 2014, 09.35PM IST
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Washington | united states | South Asia | Prime Minister | Narendra Modi | Jan Dhan Yojna | Franklin Templeton Investments | Financial Services | economy | Economic Development | Diane Farrell | Business Council
(American investors are…)
WASHINGTON: Hailing Prime Minister Narendra Modi's 'Jan Dhan Yojna', the US-India Business Council (USIBC) today described it as an "important step" toward the next stage of India's social and economic development.In a statement, USIBC said Modi's announcement of "a new pan-India comprehensive financial inclusion plan that expands access to financial services to a wider cross-section of India's citizens" is "an important step toward the next stage of India's social and economic development".
American investors are grateful for the Government of India's stewardship of the Indian economy, said the USIBC acting president Diane Farrell."USIBC looks forward to continuing to bolster industry's engagement across pensions, payments, banking, insurance and asset management," she said.
Modi today launched 'Pradhan Mantri Jan Dhan Yojana' to help the poor open bank accounts which will come with the facility of a debit card and an insurance cover of Rs 1 lakh.
"India is at a cross road with a unique opportunity to reinvent their approach to financial inclusion," said Vijay Advani, USIBC Board Member and executive vice president of Franklin Templeton Investments."I am very pleased that the Government of India is focusing on financial inclusion given that many Indians do not have access to basic banking and financial services," he said.
"While the household savings rate is high in India, most of these savings find their way into unproductive physical assets such as gold and real estate. Any efforts to increase the share of financial assets and channel the high savings into capital markets, through financial institutions such as banks, mutual funds and insurance companies would be a positive for investors and the economy at large," Advani said.The goal of ensuring access to affordable financial services including banking, investments, credit, insurance, pension facilities and most importantly, financial literacy appears to be within the reach of India's vast population, he said.
"A lot, however, depends on how various components of this plan come together and how effectively the Government is able to scale up participation from the private, public and social sectors," Advani said.
"We are pleased to see the focus & strong commitment that Prime Minister has made to financial inclusion drive. Strong execution of these actions will enable acceleration of economic growth," said Kiran Shetty, regional vice president & managing director, South Asia, Western Union.
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Jan Dhan Yojana: Revolutionary Reform Towards Financial InclusionSOCIETY
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For a country like India that has been facing a huge financial exclusion, the launch of Jan Dhan Yojanascheme is an ambitious
attempt that will provide the citizens with access to basic financial services. Prime Minister Narendra Modi had mentioned in his
Independence Day address to the nation about starting with a scheme towards financial inclusion and today mega functions and
camps are being organised across the country to mark the launch of this scheme.
Under Jan Dhan Yojana, the person who opens a bank account will get a “Rupay” debit card and the family will get a rupees one
lakh insurance.
The non-banking population of India is vast,with most of them residing in rural areas. These are economically weaker sections of
the society who do not have access to financial services and are unaware of the available facilities in the country. Usually they are
forced to borrow from moneylenders or from relatives and friends. Moreover, with no access to insurance services they are unable
to protect their available financial resources when unforeseen circumstances arise.
With income inequality being excessively wide, India has been in need of a revolutionary reform to include the poorest of the poor in
the development process. To this respect, Jan Dhan Yojana is been waited with much anticipation as the poor can greatly benefit
from it and become a part of the economic development process in the country. This new scheme can also contribute towards
raising awareness about the various insurance policies available, to which many are ignorant in India. It will benefit villagers in rural
areas where there are no bank facilities. Through the use of technology, the scheme may prove to be a winner for both government
and the public.
If every Indian has a bank account, then Direct Cash Transfer scheme can be implemented which will potentially destroy the
corruption and leakage in Public Distribution System (PDS).
While India has witnessed economic growth in the past decade, we still face challenges when it comes to implementing public
policies. Mainstream financial institutions like banks have an important role to play. The scheme is a great move, provided the
beneficiaries are genuine ones. Further, there exist apprehensions that the scheme may fall into corrupt hands with the benefits of it
never reaching the people of the rural areas; the target group of the scheme being villagers, most of who fall under the uneducated
lot. The scheme should ensure that there is complete transparency to its functioning with no middlemen activities of any kind.
Banking is an essential global business, and its importance can be felt even more in developing countries where banks can help the
poor to invest, borrow and save. With globalisation, it has become viable and profitable to engage in business with the poor,
provided they are able to engage in dealings. It is expected that with the new scheme, India will soon have cashless transaction that
is lined with other developed countries.
In the previous UPA’s financial inclusion programme, Know Your Customer (KYC) was a cumbersome process, which often
restricted account openings. Compared to Jan Dhan Yojana, it did not give emphasis on urban financial inclusion. Rural migrants
working in towns and cities faced the difficulties in getting access to banking services but now with the new scheme they can open
bank accounts and avail the benefits intended for them from any part of the country.
The aim of Jan Dhan Yojana is commendable as there is free accidental coverage and one can open a bank account with zero
balance even without KYC papers. It is said that effectiveness of this new scheme would depend on how fast the banking system
improves delivery of services, availability of more players in the financial ecosystem and introduction of technology-based financial
services.
The whole banking system for rural population gets revolutionized in one stroke. We have been hearing the phrase “financial
inclusion” for quite some time now, but nothing tangible has ever phased out at the level that was expected. With the new scheme
making extensive talks, it surely arouses yet another hope towards inclusion in the development process. Jan Dhan Yojana, along
with aiming for financial inclusion, should also seek to enhance development and growth in the country.
Valentina Telien Kom
Image Source [Google]
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Rural banking: PM Narendra Modi’s ‘Jan Dhan Yojana’ ‘will be the trigger for profitability’ for PSBs, says CrisilBy: PTI | New Delhi | November 17, 2014 9:08 pm
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While the Jan Dhan Yojana poses challenges for banks in the short-term, in the longer-term, it would augment business per branch: Crisil (Narendra
Modi photo by PTI)
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Higher business per branch and the business correspondents model may help public sector banks become profitable in rural areas
over the next five years, driven primarily by ongoing ‘Pradhan Mantri Jan Dhan Yojana’, says a report – scheme was launched by
PM Narendra Modi with much fanfare on August 28.
Rural branches have been logging in 7 per cent growth in the past five years, while branch expansion by state-run banks was
growing at a compounded annual rate of 9 per cent during the same period, as per the report which added that ongoing Jan Dhan
scheme will be the trigger for profitability.
Narendra Modi had given a call for eradicating what he termed as “financial untouchability” of the poor by opening at least one
bank account for every family in the country in less than six months under the ‘Jan Dhan Yojana’.
Can the PM Narendra Modi-promoted 'Jan Dhan Yojana' eradicate 'financial untouchability'?
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“Increasing economies of scale (with higher business per branch) and usage of low-cost channels such as business correspondents
(BCs) will help public sector lenders, who are currently incurring losses in their rural operations, to turn in profits over the next
five years,” Crisil said in the report here today.
It said the newly-launched Jan Dhan scheme is likely to increase the economies of scale in the years to come. While the Jan Dhan
Yojana poses challenges for banks in the short-term, in the longer-term, it would augment business per branch, it said.
The Jan Dhan Yojana, the brainchild of PM Modi, aims at eradicating financial untouchability by providing bank accounts to the
poor.
Crisil said as for private banks, rural operations are mildly profitable already, generating a tenth of their overall returns, and the
situation will get even better.
Rural banking was shunned by banks because of the unfavourable economics involved in the model and they started
implementing only in the last decade or so under regulatory and policy compulsion.
Crisil said during the last five years, business per branch in rural areas has grown at a compounded annual growth rate of 7 per
cent, despite the overall branch network growing at 9 per cent annually.
Banks are also bringing down operating expenditure and expanding rural reach by experimenting with smaller branches and
increasingly using BCs, as per the report.
Going forward, more such models are expected to be adopted, leveraging technology, it said.
“Improvement in technology and favourable regulations have made it possible for banks to service their rural customers through
business correspondents at about a 15th of the cost of a rural brick and mortar branch, which is about Rs 100-110 per
transaction,” Crisil senior director for industry and customised research Prasad Koparkar said.
“We expect 25-30 per cent of liability-side transactions in rural areas to be routed through BCs by FY19, up from 8-13 per cent
currently,” he said.
The report further said the asset quality will also improve as credit bureaus and research agencies penetrate deeper into the
countryside, and as economic growth picks up.TAGS: Indian Economy Jan Dhan Yojana Modi News Narendra Modi
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PM Jan Dhan Yojana provides opportunity for digitising financial transactions for poorSEP 04, 2014
ALIYA ABBAS
#DIGITAL INDIA
#IN-DEPTH
#JAN DHAN YOJANA
Union Finance Minister Arun Jaitley and SBI Chairperson Arundhati Bhatacharya during the launch of digital banking
initiative sbiINTOUCH on the occasion of 60th foundation day of the bank in New Delhi. File Photo PTI
After successfully launching Pradhan Mantri Jan Dhan Yojana (PMJDY) which ensures financial security for the poor and gives
them the benefit of banking services along with insurance of Rs 1 lakh, the Modi Government must expand services which lets these poor use the facility of mobile banking and electronic transfer of funds.
In fact to further enhance financial equality amongst all marginalised people across the country, Narendra Modi Government can take a cue from the World Bank report which talks about digital payments as an option to enable billions of people who do not have access to the banks. In India, Pradhan Mantri Dhan Jan Yojana can become the instrument to provide banking services as well as means to utilise digital financial transaction opportunities.
The report, titled The Opportunities of Digitising Payments and published by The Guardian says that this measure of bringing the poor under the purview of electronic and mobile banking will spur economic growth and also reduce income disparity in their respective countries. The Report further states that building on a telecom revolution which has connected billions of poor people across the globe, now mobile banking should be encouraged and propagated widely. This report argues that G20 countries should target digital payments as a channel to help people access basic banking facilities, which it says will encourage saving and reduce theft and corruption.The Opportunities of Digitising Payments says, “Rapid development and extension of digital platforms and digital payments can provide the speed, security, transparency and cost efficiency needed to increase financial inclusion at the scale required to achieve G20 goals.”
Further explaining the report, The Guardian has quoted, Managing Director of the Better Than Cash Alliance, Ruth Goodwin-Groen who said, “Digital payment services such as Kenya’s M-Pesa mobile money, prepaid debit cards for Syrian refugees in Turkey, and electronic bank transfers are helping people save money securely in formal banks.”
The World Bank report also cites examples of how other countries can benefit from these measures. Ruth further states, “When we’re looking at large emerging economies in the G20 – the Indonesias, the Brazils, the Mexicos – there are huge opportunities in those economies to transition their cash payments to electronic payments,” she said. “But what works in each contextis what is appropriate – it depends on the country you’re looking at.”
Moreover, the system when implemented properly will help India to tap the flow of the money, thus enabling Modi Government to curtail corruption to a large extent. The report also cites concerns especially in view of terror attacks and digital payments which are vulnerable to electronic thefts. For instance, the news daily highlights the example of Barclays Bank which had apparently closed the accounts of a Somalian company, Dahabshiil, fearing that the money sent electronically could be intercepted and used by Islamist terror group al-Shabaab. Since terrorism is also a major concern for India, it can benefit by utilising digital system which can be intercepted by any investigative agency in case such a situation arises out.
According to the report, several thousands of marginalised people heavily depend on remittance transfers, which add up to about $514bn a year, leaving them exposed to high fees and slow transfer speeds, and digitised systems can reduce this burden if implemented properly. Citing another example, the report says that the Governments and consumers, financial providers in sub-Saharan Africa are still bearing high costs of cash payments, which are mainly associated with manual acceptance, record keeping, accounting, storage, security and transportation. The Government of India can implement the system which can reduce this burden to a large extent.
According to Leora Klapper who is an economist with World Bank’s development research group, said, “We interviewed people in 150 countries on how they save, borrow, make payments, manage risk. The data strikingly shows very low usage of simple ownership of
accounts in developing countries, particularly among women, especially in rural areas.”
Interestingly, the research was conducted in about 150 countries, including Brazil, India, Kenya, Nigeria, the Philippines and South Africa. The research further says that digital payment services will reduce the cost of sending money both domestically as well as internationally and will also transfer money quickly and safely.
The report states that it has been proven that digital payments are helpful in reducing the cost of sending and receiving. Moreover, it increases security, and betters the goal of broader financial inclusion by not only increasing the ownership of accounts but also usage because people are receiving regular payments. And this is what has been Narendra Modi’s vision – a vision to bring the marginalised segment under the broader programme of financial inclusion.
The Guardian further reports that G-20 delegates will be meeting in November this year in Australia, where they will be debating upon the future of the world economy. The World Bank also urges leaders of the world to discuss how they can include a broad-based digital financial system to fight against poverty. The report also highlights the need of greater participation of women in the economy, including greater access to payments.
Even the Finance Minister Arun Jaitley in his Budget speech on July 10 had announced the Government’s intention to include financial inclusion of poor, minorities and every citizen of the country.
Modi: Banking for all to end "financial untouchability"BY MANOJ KUMAR
NEW DELHI Thu Aug 28, 2014 7:37pm IST
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Prime Minister Narendra Modi speaks during the launch of the Jan Dhan Yojana, or the Scheme for People's Wealth, in New Delhi August 28, 2014.
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(Reuters) - Prime Minister Narendra Modi promised on Thursday to end "financial untouchability" with a
scheme to ensure the majority of households in his country of nearly 1.3 billion people has a bank account
within months.
If successful, the scheme could help mend strained state finances by better targeting billions of dollars in
welfare spending as well as relieving poverty in a country where about 40 percent of the population has no
access to banking.
"Mahatma Gandhi tried to end untouchability in the society," Modi said, referring to modern India's
founding father and his drive to stamp out bias based on the traditional caste system.
"If we want to eradicate poverty, we need to get rid of financial untouchability," he said.
"If forty percent of Indians are not a part of the economy, how can we be successful in eradicating
poverty?" Modi asked.
The government said nearly 15 million people opened accounts at centres around the country on the first
day of the programme. The goal is to open 75 million accounts by January next year.
The campaign to bring the masses closer to the financial system could improve measurements of economic
growth and bolster Modi's popularity among the poor.
Under the scheme, the government will give account holders a debit card and accident insurance cover of
up to 100,000 rupees ($1,654). Good customers would also be eligible for an overdraft facility of up to
5,000 Indian rupees after six months.
Earlier this month, Raghuram Rajan, governor of the Reserve Bank of India, said bank profitability was
crucial for the success of the scheme, which could help break a link between poor public services and
corruption.
Some critics fear the overdraft facility could end up swelling bad loans at banks as it does not spell out how
the banks can collect debts.
CUT WASTE AND CORRUPTION
Bad loans at Indian banks rose to 4.1 percent of gross advances in March from 2.4 percent in March three
years ago, the RBI said in its annual report last week. Restructured loans, meanwhile, rose to 5.9 percent of
gross advances in March from 2.5 percent in June 2011.
The debit cards use the state-run RuPay payment system, designed as an alternative to Visa and
MasterCard. Modi, whose Hindu nationalist ideology emphasizes Indian pride, wants the indigenous system
to be accepted globally.
"We know about the popular Visa cards … should we not have the intention that our RuPay card works in
any country globally?" he said.
The launch of the Jan Dhan Yojana (Scheme for People's Wealth) came weeks after Modi blocked a global
trade deal, saying it threatened the interests of poor farmers.
One reason cited for India's opposition to the trade deal was that it could limit the country's room to
provide subsidized food grain. That problem could be side-stepped by a shift to cash transfers of welfare
payments, made possible by bringing farmers into the banking system.
Such targeted welfare programmes have been credited with poverty reduction in several Latin American
nations.
By paying benefits directly into bank accounts, the scheme could cut waste and corruption that inflate
India's $43 billion subsidy bill, equivalent to more than 2 percent of its GDP, for handouts of grain, fuel and
fertiliser.
The push for greater financial inclusion would also diminish the influence of moneylenders and other
informal financing channels that operate outside the ambit of the Reserve Bank of India (RBI), blunting its
monetary policy tools.
The drive for universal banking access is not new but the failure to provide services tailored for the poor
and low-income groups has kept India way off its goal.
Many accounts opened in the past lay idle, an issue the government hopes to overcome by using them for
subsidy payments.
While not all areas in the country are close to formal banks, new rules allowing mobile phone companies
and other companies to act as banks could help leapfrog such infrastructure deficiencies.
(Additional reporting by Aditya Kalra; Writing by Frank Jack Daniel; Editing by Tom Heneghan)
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Jan Dhan Yojana features in Guinness Book of World RecordsPTI New Delhi Last Updated: January 20, 2015 | 20:22 IST
FM Arun Jaitley
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As many as 11.5 crore bank accounts have been opened under the Pradhan Mantri Jan Dhan Yojana , exceeding the enhanced target of 10 crore and covering 99.74 per cent of households, Finance Minister Arun Jaitley said on Tuesday."Most of India today is included in the banking system," he said, adding that more than Rs 9,000 crore has been deposited in the Jan Dhan accounts.
Prime Minister Narendra Modi announced the financial inclusion scheme in his first Independence Day speech last year. It was launched in August with a target to open bank accounts for 7.5 crore poor persons by January 26, 2015. The target was later increased to 10 crore accounts.Addressing a press conference in New Delhi, Jaitley said the government would use these bank accounts to pass on benefits to individuals under its various social security schemes.Financial Services Secretary Hasmukh Adhia said that even Guinness Book of World Records has recognised the achievements made under PMJDY.In its citation, the Guinness Book said: "Most bank accounts opened in one week as part of the Financial Inclusion Campaign is 18,096,130 and was achieved by the Department of Financial Services, Government of India from August 23 to 29, 2014." Exclusion of a large number of people from the banking network was inhibiting growth, Jaitley said. "Financial Inclusion is one of the top most priorities of the government. PMJDY is the biggest financial inclusion initiative in the world."He said that out of the accounts opened, 60 per cent are in the rural areas and 40 per cent in the urban areas. Share of female account holders is about 51 per cent.Jaitley said that RuPay cards have been issued to more than 10 crore beneficiaries who will get a benefit of personal accidental insurance of Rs 1 lakh besides a life insurance cover of Rs 30,000 for eligible beneficiaries.Describing the scheme as "a game changer for the economy", the minister said that it would provide the platform for Direct Benefits Transfer (DBT) and help in plugging leakages in subsidies.Overall, public sector banks alone opened 9.11 crore accounts under PMJDY, followed by regional rural banks which opened about 2.01 crore accounts. On the other hand, 13 private sector banks together open just 37.58 lakh accounts.According to Adhia, all these accounts are being used for payment of wages under the MNREGA scheme and LPG subsidy. More than Rs 33,000 crore towards MNREGA, LPG and other benefits will be routed through the bank accounts annually.On the future of the scheme after January 26, Jaitley said the government will take a view on it later.Responding to a question of duplication of accounts, the minister admitted that there might be some such cases and that was the reason for enhancing the target to 10 crore accounts.The issuance of the RuPay cards to account holders would encourage use of plastic money and help in moving towards a cashless society, Jaitley said.The proposal to provide overdraft facility in such accounts would also act as micro finance and prevent people from taking loans at exorbitant rates from money lenders.Jaitley said that most of the country has been covered by the PMJDY, except those areas which have poor connectivity, are impacted by left-wing extremist and are inaccessible.
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Over 20 Indian, U.S. and other international private sector organisations will partner with USAID in supporting the central government’s Jan Dhan Yojana programme, a statement said on Wednesday.
According to the US Agency for International Development (USAID), the initiative is part of President Barack Obama’s pledge to back India’s initiative to provide its citizens with access to financial services and lay the foundation for a world-leading, inclusive digital economy.
“With support from the World Economic Forum, these partners, in consultation with the government of India, will join in establishing a public-private partnership to expand the ability of Indian consumers and businesses,” the statement said.
The initial partners represent six categories of organisations - fast moving consumer goods companies, banks, payment networks, mobile network operators, e-commerce, and leading civil society organisations including Axis Bank, Bharti Airtel, Coca-Cola, ITC Limited, MasterCard, SnapDeal among others.
“USAID looks forward to working with each to make financial inclusion a long-lasting and sustainable reality in India,” it said.
Under the Jan Dhan initiative, over 110 million new households have received bank accounts, which entitle them to debit cards and other financial tools needed to participate in the formal economy.
“These efforts have caught the attention of the world and showcase India’s global leadership in building an inclusive economy,” said the statement.
Keywords: Jan Dhan Yojana, Obama support
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Jan Dhan Yojana likely to boost rural spend in 2015-16 Mahua Venkatesh, Hindustan Times, New Delhi
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Updated: Feb 25, 2015 10:55 IST
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Prime Minister Narendra Modi at the launch of Pradhan Mantri Jan Dhan Yojna at Vigyan Bhawan in New Delhi. (Mohd Zakir/HT Photo)
Boosted by the opening of new zero-balance savings accounts under the Pradhan Mantri Jan Dhan Yojana, consumption demand from the rural sector, with about 70% of India’s poulation, is likely to surge in 2015-16.
Account holders under the scheme will not only be eligible for loans after six months, but subsidy amounts from other govt schemes will also be directly transferred to these accounts. This will give a fillip to rural activity and demand, which in turn will help the economy grow.
The government may target a growth rate of 7.8-8% for 2015-16, a senior government official said.
“It (opening of bank accounts) does have the potential to perk up rural activity and demand, and a regular monsoon spell would supplement this. However, overall economic activities would also have to improve,” DK Joshi, chief economic adviser, Crisil, told Hindustan Times.
Over 115 million bank accounts have been opened under the scheme, according to official reports.
According to an internal research by the State Bank of India, these new savings accounts are likely to make rural discretionary spending jump up.
The increase in rural wages in 2014-15 has been slow. This is especially after lower spendings on the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) by the government, and a narrower increase of the minimum support prices (MSP) of agricultural products. MSP is an intervention by the government to insure agricultural producers against any sharp fall in farm prices. Official sources said the government was watching the sector with a keen eye to fuel the rural economy.
A few years ago, when urban demand remained flat, it was the rural sector which helped in pushing the growth rate.
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Jan Dhan Yojana has helped poor, but financial inclusion still far off According to a World
Bank survey in 2012, only 35% of adults in India had access to a formal bank account and
only 8% borrowed from institutional and formal sources Vishwanath Nair Tweet inShare
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ecosystem Narendra Modi taps public in battle over a new land law (Left to right) Vishwavir
Ahuja, MD and CEO of RBL Bank; Romesh Sobti, MD and CEO of IndusInd Bank; Vikram
Akula, chairperson of Vaya Finserve; Tamal Bandyopadhyay, consulting editor, Mint; Vijay
Mahajan, chairman of Basix Group; V. Vaidyanathan, chairman and MD of Capital First, and
Alok Prasad, CEO of MFIN, at the Mint Annual Banking Conclave 2015, in Mumbai. Photo:
Abhijit Bhatlekar/Mint Even as the Prime Minister’s Jan Dhan Yojana (PMJDY) has helped a
majority of poor households in India open bank accounts, there are many activities of
financial inclusion still pending fulfilment, said a panel of experts at the annual banking
conclave organized by Mint on Thursday. The panel consisted of senior officials from the
banking and financial inclusion space, including Vijay Mahajan, chairman, Basix Group;
Vikram Akula, chairperson, Vaya Finserv Pvt. Ltd; V. Vaidyanathan, chairman and managing
director, Capital First Ltd; Alok Prasad, chief executive officer, Microfinance Institutions
Network (MFIN); Romesh Sobti, managing director (MD) and chief executive officer (CEO),
IndusInd Bank Ltd, and Vishwavir Ahuja, MD and CEO, Ratnakar Bank Ltd (RBL).
Vaidyanathan of Capital First said exclusion of the urban poor was one of the most
important issues overlooked by the banking industry. “There is a lot of exclusion, right
under our noses, in the urban territories. That has often gone unnoticed, unreported and
unattended. So, when we talk of financial inclusion, I’d wish that we bring the urban poor
into the agenda. That would make a big difference,” he said. According to World Bank’s
Global Financial Inclusion Survey (2012), only 35% of adults in India had access to a formal
bank account and only 8% borrowed from institutional and formal sources. As on 29
January, banks had opened nearly 124 million accounts under the Prime Minister’s financial
inclusion scheme, according to data on the PMJDY website. Of this, nearly 74 million were
in rural areas, and the rest in urban areas. Another issue plaguing the banking system is
the lack of credit available to those who had opened accounts under the financial inclusion
agenda even before PMJDY came into being, Vaidyanathan pointed out. “The credit facility
is available to not even 10% of the current lot of customers. So there is financial inclusion
in terms of account opening, but there is exclusion in the credit given to the same
customer,” he said. But while talking of credit facilities to the poor and excluded, the
banking system also needs to be careful that these loans are not faced with frequent loan
waivers by politicians, the group noted. According to Mahajan of Basix, though India is
home to a large population of youth, this population is also unskilled and poorly educated.
He estimated that each young person would need about Rs.60,000-70,000 for skilling
purposes in order to make them employable. “But this cannot be done by the government
because it will bust the fisc. So it has to be done through bank loans... We need a
guarantee that if these loans are given by the crores, they should be protected in terms of
repayment. There should be a mechanism of Aadhaar-based recovery of those loans,”
Mahajan said. The panel also discussed the innovations of the banking system in making
financial inclusion a viable business strategy. Sobti from IndusInd Bank said the banking
system had already invested Rs.1,400-1,500 crore under PMJDY, which has helped banks
accelerate the implementation of technology and complete processes such as know your
customer, which would have otherwise taken longer. He also talked about the viability of
conducting business while ensuring financial inclusion is not affected. Unlike urban areas,
where fee is a major contributor to business growth, rural businesses would have to be
focused on lending to the population there, he said. “We (IndusInd Bank) have focused on
an asset-led strategy where we have given three quarters of a million dollars to the rural
poor,” Sobti said. Akula, who is also the founder and former chairperson of SKS
Microfinance Ltd, said the best way to make financial inclusion viable is to bring in multiple
products for the customers. RBL has formed a special core banking solution for financial
inclusion which has helped cut costs and improve efficiencies, said Ahuja. About 55% of the
bank’s loan book is tilted towards micro, small and medium enterprises and lending
towards agriculture and rural opportunities, he said. Prasad of MFIN said that while it was
important to make the segment financially viable, it should be ensured that lending was
based on “sanity and not vanity”. He discussed the example of the microfinance industry
where some players had indulged in profiteering—instead of profiting from the business—
which led to a crisis in 2010. He also pointed how the sector had now learned from its
mistakes and was coming back to profit, despite strict regulatory conditions. The panel
also discussed the advent of small and payments banks, while talking about the challenges
and opportunities that they are likely to face. The Reserve Bank of India announced final
guidelines for licensing of small and payments banks on 27 November. These banks are
aimed at serving customers who do not have access to the formal banking system. “India
will need at least 50 small banks in the next five years,” Vaidyanathan said. According to
Mahajan, a small bank would need to develop a deposit base of at least Rs.1,200 crore to
be viable for business. This was likely to take a few years and could play as a “valley of
death” for many new players, he added. When it comes to competition, established banks
need not need be wary of small and payments banks, but rather learn about the innovative
technology and business models that they will bring in to the banking space, said Sobti.
Why the RBI Governor warned about Jan Dhan Yojana
Simplus Information Services – Tue 7 Oct, 2014 4:28 PM IST
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Article: Concerned about Jan Dhan achieving proper inclusion: Raghuram Rajan
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Banks have seen deposits worth Rs 1,500 crore as part of the Jan Dhan Yojana, Prime Minister Narendra Modi
said in his speech in New York recently. He added that four crore new accounts have been opened.
In a country, where majority have no access to banking services, this should come as good news. Yet, there is one
person who is wary of this growth.
RBI Governor Raghuram Rajan issued a warning recently about the Jan Dhan Yojana, asking banks to be careful
about the rollout.
Here is your five-point cheat-sheet on the matter:
· What is Jan Dhan Yojana: This the scheme announced by Prime Minister Narendra Modi to encourage
more people to open bank accounts. As part of the scheme, people would be able to open accounts easily with
limited documentation. They would also be given a RuPay debit card, life insurance cover of Rs 30,000 and an
accidental insurance cover of Rs 1 lakh. Those who have money in the account could even have access to an
overdraft facility. The facility is like a cheaper loan for a shorter period of time, through which customers can
withdraw more money from their accounts than possible.
· Aggressive push: The Jan Dhan Yojana targets to encourage 7.5 crore new bank accounts by January 26 –
the Republic Day. This gives banks five months to push the scheme aggressively. This is much higher than the six
crore accounts opened in the entire fiscal last year. On the first day itself, as many as 1.5 crore accounts were
opened.
· Warning: On September 15, the RBI governor spoke about the risks of the Jan Dhan Yojana at a banking
conference. "When we roll out the scheme, we have to make sure it does not go off the track. The target is
universality, not just speed and numbers," Rajan said. He added that the scheme would be a waste if it the new
accounts are left untouched without any transactions.
· Reason: Operation of bank accounts comes at a cost for banks. Yes, the deposits act as cheaper source of
funds for banks, but the interest payments and additional services offered to customers are costly. This has an
impact on the overall profitability of banks. Banks earn money only if an account conducts transactions that can
be charged. The RBI worries about accounts that could be opened for namesake and then left unused. The scheme
could also be taken advantage of by those looking to get the freebies offered by the government.
· Risks to banks: This exposes banks to risks. This is especially because banks are easing account opening
rules, thus overlooking the Know Your Customer (KYC) norms. Moreover, the scheme is mainly promoted by
public-sector banks, which are
Mostly EconomicsThis blog covers research work in Economics with focus on India
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Next Jan Dhan Yojana to target Mutual Funds/Equity markets?
I was actually thinking that the Jan Dhan Yojana should have also linked to equity market. Just like the bank account under
the scheme provides insurance and overdraft facility, it could have provided a demat or a mutual fund account as well.
Given the huge surge in equity markets, it could have made some people wealthier (or atleast perceive themselves). The
government could have pumped itself saying we have created so much wealth for the excluded poor.
Apparently, SEBI did think about the idea and actually asked MF industry to replicate the bank account scheme in MF
space.
Last week, U K Sinha, head of the Securities and Exchange Board of India (Sebi), impressed by the success of the Pradhan
Mantri Jan Dhan Yojana, suggested a similar approach to enhance mutual funds’ reach across citizens. At the inauguration
of Mutual Fund Utility, the single platform for all MF transactions, he said, “We should take some lessons from what is
happening around us and try to expand the reach and role of the MF industry. If 13 crore (130 million) Jan Dhan accounts
can be opened in such a short time, obviously the MF industry should give itself a target to reach out to all citizens.”
Really?
The industry is divided:
Hardly anyone disagrees, say sceptics, on bringing more investors into MFs’ ambit. However, when it comes to practicality,
the idea fails to pass the litmus test. For that matter, the majority of Jan Dhan accounts have no balance. MF executives
reject the suggestion. According to them, strict Know Your Customer (KYC) norms, absence of freebies like default
insurance (provided by Jan Dhan Yojana) and unavoidable mis-selling dwarf this approach to expand.
The chief executive officer (CEO) of a mid-sized fund house, said, “Expansion for an industry like us can’t be forced with an
artificial stimulation. If we follow the Jan Dhan approach, there are huge possibilities of mis-selling. Moreover, how possible
is it to get money in those new accounts? We are here to create wealth for investors and for that, we need at least some
money to start with.” He wished not to be named. Another chief executive said: “I agree the sector needs to expand but a
Jan Dhan-type approach might cost us heavily. It’s a definite No. Will there be any benefits an investor get if s/he keeps it a
zero account folio? Who would bear the cost of KYC verification and other costs attached with maintenance?”
Sectoral experts put the KYC verification charge between Rs 30 and Rs 50. The cost of maintaining the account is
additional. By that calculation, for every 10 million of new folios, costs will be at least Rs 30-60 crore, for a sector operating
on a very thin margin, with a minimum net worth requirement of Rs 50 crore.
Dhirendra Kumar, chief executive of fund tracking firm Value Research, said: “Unless the fundamental structure is
revamped, following the Jan Dhan approach does not look practical. KYC norms are very complicated and it appears they
are there to keep investors away. It is causing inconvenience to people to open an MF account. It is for the regulator to
streamline and enable growth for the sector.”
An executive said his fund house was working on a proposal to Sebi if it could use Investors Awareness Programme funds
for KYC for new investors and open accounts for them. “If people want to invest they can use these folios. Else, they can
use it when they want to,” he said.
Others disagree. “Technically, the IAP funds should not be used for KYC and opening accounts. This way, when investors
decide to invest money, distributors and AMCs will make money out of it. Ironically, funds used to open such accounts
came from money meant for investors’ awareness and education,” said an executive.
Sundeep Sikka, chairman of Association of Mutual Funds in India (Amfi), said, “Industry has to move 100 per cent in that
(Jan Dhan Yojana) direction. If there is support from the government MF should also have the same approach. Industry’s
next target should be to reach 10 crore of investors.”
All this sounds good when markets are on the way up. In case of crisis, things go really bad as wealth declines across people. It is
trying times when you need money, is when you might not have money.
The real deal is providing people with real things and not these financial ones. If real things are provided, financial ones will follow.
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INDIA
25 August 2014
INDIA'S JAN DHAN YOJNA INITIATIVEWhat are the key considerations for obtaining desired outcomes in India's Jan Dhan Yojna initiative, which is designed to improve access to financial services? Mukul Asher shares his analysis.
What are the key considerations for obtaining desired outcomes in India's Jan Dhan Yojna initiative, which is designed to improve access to financial services? Mukul Asher shares his analysis.
On the occasion of the 68th Independence Day, Prime Minister Narendra Modi announced an initiative, to be formally launched on August 28,2014, to enable those currently not having access to banking and other financial services to do so and thereby expand their options to generate better livelihoods and to improve household welfare.
The name of this initiative, “Pradhan Mantri Jan Dhan Yojna” (PMJDY) was the result of a competition held through the MyGov platform (http://mygov.nic.in/). This platform is designed to solicit ideas and substantive material from the public society on variety of issues. This illustrates that the Prime Minister Modi led government understands the role of ideas, and sourcing them from as wide a network as possible, are among the most important drivers of economic growth and contributors to good public policies.
It is hoped that the platform will also be used to provide inputs for a feedback mechanism for facilitating monitoring and requisite corrective measures as implementation of the PMJDY progresses.
Rationale:The main rationale for introducing PMJDY is that according to the 2011 Census, of the 250 million households in the country, only about 145 million, or about three-fifths of the total had access to basic banking services. Thus, about two-fifths of the households (105 million) do not have access to banking services, let alone to broader financial services. This result is in spite of many years of efforts to achieve financial inclusion by various government and non- government organization over several decades.
There is also substantial scope for improving the quality, affordability, and case of access to banking (as well as to broader financial services such as credit, insurance, and pensions).
It should however be stressed that access to banking and to financial services is not an end in itself, but it is an instrument, which when complemented by other appropriate policy initiatives, (such as Digital India initiatives) could enable households to obtain better livelihoods, and quality of living. Access to banking and financial services thus carries responsibilities by the beneficiary households and other stakeholders to utilize such access to improve their capabilities, and by government agencies and by service providers to perform their tasks competently, and with focus on desirable societal outcomes.
Main Features:Full details of the PMJDY are yet to be unveiled. The media reports suggest that the initiative will be operationalized in two phases. The end objective is for each of the 75 million identified families to have two bank accounts, for a total of 150 million new accounts, each account accompanied by a debit card, by August 2018, just four years away. Each bank account will have an overdraft facility of INR 5,000/- , and accident insurance cover of INR 1 Lakh.
A feature connecting the overdraft to a credit bureau to enable low income households to build credit histories merits serious consideration. This feature could facilitate graduation by beneficiaries to more mainstream banking and financial services; and could mitigate information gaps leading to excess borrowing and corresponding higher credit risks by the lenders.
There is also a provision for minimum monthly income of INR 5,000/- for business correspondents who link account holders with the bank. It is however worth noting that there are still substantial numbers of villages with around 2000 people which lack a bank branch. The pace of opening branches in small towns and villages has been too modest to provide the requisite bank facilities to all villages by the year 2018 envisaged in PMJDY.
Analysis:The targets set for PMJDY are indeed very ambitious. The PMJDY increases the demand for banking and related services massively. India’s insurance sector, both life insurance and non-life insurance components are not in robust health, while life insurance coverage at less than 10 percent of the population is low. The geographical coverage of branches of insurance companies also remains limited. The reforms of insurance sector, including modernizing regulatory structure of this sector, remain high priorities.
The above creates huge gap between the demand and supply of banking and financial services included in PMJDY.
It is evident that the current structure of the banking and finance sector, its technology levels, skill-sets and mind-set of the stakeholders in the sector, organizational capabilities, and regulatory structures are not equipped to attain the ambitious goals of the PMJDY. The wide demand-supply gap in any area of public policy (such as in Right to Education, RTE, Act) has the potential to impose high economic, social, and political costs. A sound practice in any public policy is to keep demand and supply of the relevant services (good and assets) in reasonable balance.
As the PMJDY substantially increases the demand for banking and other services, it is the pace at which greater effectiveness on the supply side can be attained which should determine the targets of PMJDY. The vision of having two accounts each for 75 million households must be tempered with the supply side capacities. In this context, reasons for two (rather than at least one) bank account per household need to be reexamined.
Supply side improvements are needed in the delivery systems through focused but flexible use of technologies, and through greater efficiencies and effectiveness by the banking, insurance, and other service provider organizations. Thus, too rigid a design mandated nationally is unlikely to be conductive to achieving the goals. Local context and household specific flexibility and innovations need to be encouraged.
The features of PMJDY outlined above suggest that from the society’s perspective, two types of costs will need to be managed. The first type is the initial capital and related costs of opening the bank account, and costs associated with pricing (costing) of the insurance cover based on rigorous actuarial projections.
Insurance is about micro-economic pricing in a dynamic context involving long term. When insurance cover is provided, society must bear the costs of this service. If these costs are to be borne through governments budgets, given India’s urgent need for fiscal consolidation and for reorienting government expenditure towards growth and fairness enhancing expenditure (called fiscal flexibility), estimates of fiscal and of economic costs to the society need to be estimated rigorously and transparently.
The second type of costs are those costs associated with operating bank accounts, servicing insurance claims and overdraft facilities, and maintaining records of beneficiaries to utilize the services. Unless the bank accounts are used, their full beneficial effects cannot be realized. Therefore transaction costs of access to banking services must be minimized.
An important avenue for obtaining the PMJDY initiative is to use the data-base generated and delivery systems constructed for more effectively implementing other government schemes, such as payments under various pension schemes, energy, food, fertilizer subsidies, and wage payments under employment schemes such as MGNREGS (Mahatma Gandhi National Rural Employment Guarantee Scheme) which currently are inefficiently delivered.
With accessibility to the banking facilities, direct transfers of the benefits to the relevant accounts have the potential to reduce transaction costs, and minimize leakages. The resulting economic savings need to be
competently estimated for a more complete social cost-benefit analysis of PMJDY.
The above indirect economic benefits however are not automatic. To obtain them, substantial enhancement of managerial and technical competency, and much better policy and organizational coherence will be required. Basic literacy levels, including financial literacy levels, will also need to be enhanced. These attributes, if developed in a focused and integrated manner, could potentially help generate positive net economic and social benefits, while helping to expand fiscal space.
The above analysis suggests that the considerations which have led to the introduction of the PMJDY have considerable merits. But achieving its goals will not be either quick or automatic.
The PMJDY should not be regarded as a standalone initiative but as one of several integrated initiatives designed to realize progress in financial inclusion to expand choices and capabilities of the beneficiary households for pursing better livelihoods.
The success of the PMJDY should be measured by the progressive reduction in the number of households needing the assistance from this initiative after around 2020. Accountable and transparent organizational structure for implementing PMJDY in an integrated manner suggested in this column should be regarded as essential for realizing the desired societal outcomes.
AcknowledgementsMukul G Asher is Professorial Fellow, National University of Singapore, and Councilor, Takshashila Institution.
This article was originally published "The Jan Dhan Yojna: the key considerations in obtaining desired outcomes" by Pragati: the Indian National Interest Review, on August 24, 2014.
Raipur : Pradhan Mantri Jan-Dhan Yojana will prove to be a milestone : Shri Vishnudev Sai : Union Minister of State inaugurates the scheme in capital city Raipur
Target of opening minimum two bank accounts of each familyFacility of insurance cover of Rs 1 lakh and overdraft of up to Rs 5000 for account holders
Business correspondents of nationalized banks to be appointed in villages lacking bank facilityRaipur, 28 August 2014
Union Minister of State for Minerals, Steel and Labour Shri Vishnudev Sai today inaugurated the Pradhan Mantri Jan-Dhan Yojana
in a function organized at new circuit house in capital city Raipur. In his address to the function, Minister Sai said that the scheme
announced by Shri Narendra Modi is a beneficial scheme for crores of poor people in the country. Pradhan Mantri Jan-Dhan
scheme will prove to be a milestone of socio-economic development for poor families of the cities and villages, which lack proper
banking facilities. He said that the first phase of this ambitious scheme aims at providing banking facility to each and every family of
the country. Talking about the positive aspects of the scheme, Minister Sai said that this day is a historical day for Chhattisgarh as
well as entire nation. In the inaugural function, Chief Guest Vishnudev Sai symbolically presented new bank accounts to a few
beneficiaries along with heart wishes and greetings.
Chhattisgarh Government's Health, Urban Administration and Commercial Tax Minister Amar Agrawal presided over the function.
Member of Rajya Sabha Dr Bhushan Lal Jangade and Raipur Jila Panchayat President Lakshmi Verma marked their presence as
the special guests of the occasion. State Government's Chief Secretary Vivek Dhand delivered the
welcome speech and threw light upon the important aspects of this new scheme. The function was organized by State
Government's Finance Department, Directorate of Institutional Finance and State-level Bankers Committee. Union Minister of State
Vishnudev Sai said in his address that despite being a new state, Chhattisgarh has made many achievements in various fields of
development within just 14 years of its formation. But it is important to ensure availability of bank facilities in each and every village
of the state. Pradhan Mantri Jan-Dhan Yojana will prove immensely beneficial in this direction. Shri Sai said that under this scheme,
insurance cover of Rs 1 lakh will be provided to each account holder and if the account is regularly operated for six months,
overdraft of upto Rs 5000 will be provided. Minister Sai said that amount of grants under various government schemes will be
directly transferred to the account holders. He said that there are nearly 6 lakh villages in India. Prime Minister Shri Narendra Modi
has set the goal of establishing one bank outlet between each 1000-1500 houses so that people may avail immediate banking
facilities. Union Minister said that Jan-Dhan Scheme is extremely important in terms of financial inclusion. He said that financial
inclusion is the process of providing sufficient amount of loans and timely financial services to the deprived, helpless and
economically weaker section of society. Under Pradhan Mantri Jan-Dhan Yojana, such families will be associated with banks so that
they may avail the benefits of savings, insurance, loan and other banking services.
While presiding over the programme, State's Commercial Tax Minister Amar Agrawal said that Shri Narendra Modi is the first Prime
Minister of the country to have this vision of bank account facility for each and every family in India. And today, this vision has begun
to take the shape of reality. Minister Amar Agrawal said that about 20 per cent of the country's population has no access to banking
facilities. In such a scenario, Pradhan Mantri Jan-Dhan Scheme will turn out to be a catalyst for economic progress of such families
in the country. Chief Secretary Vivek Dhand said in his welcome address that Pradhan Mantri Jan-Dhan Yojana will contribute in
expansion of banking facilities to each and every village of the state as well as the country as a whole.
Chief Secretary Dhand also informed that Chhattisgarh has nearly 20,000 villages but the number of branches of banks is nearly
about 1109. It is required to provide banking facility in nearly four thousand villages of the state, as people here have to travel 10-15
kms for even the simplest work like withdrawal of money. Pradhan Mantri Jan-Dhan Yojana will prove largely beneficial in making
banking services accessible to such villages through financial inclusion. Chief Secretary Dhand said that due to lack of proper
banking services in rural areas, people often chose to deposit their savings in chit-fund companies but most of such chit-fund
companies turn out to be fraud. Pradhan Mantri Jan-Dhan Yojana will connect needy families of rural and urban areas to
government banking facility and will provide them financial security. He told that under this scheme, nationalized banks will appoint
their business correspondents in the places lacking proper banking facility. The bank may select an individual, a social welfare
organization or a self-help group etc of that particular place as business correspondent. Under the scheme, beneficiary account-
holders will be issued ru-pay debit cards.
Chief Secretary told that in Chhattisgarh, Rs 1500-1600 crores are distributed to nearly 26 lakh labourer families as wages under
MNREGA. Moreover, more than 12 lakh beneficiaries of the state are provided monthly pension under Social Security Pension
Schemes. Scholarships are distributed to lakhs of students in the state. On the occasion, senior officials of various banks, public
representatives and prominent citizens were present. Vote of thanks was proposed by Chief Managing Director of State Bank of
India (SBI) Ritendra Ghosh.
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Is the PMs Jan Dhan Yojana a fight against poverty?Topics > GD > Latest Group Discussion topics - GD topics with answers > Is the PMs Jan Dhan Yojana a fight against poverty? > Post your comment
Is the PMs Jan Dhan Yojana a fight against poverty?Deepa Kaushik 08-31-2014 02:29 AM
Is the PMs Jan Dhan Yojana a fight against poverty?
IntroductionPrime Minister Narendra Modi has launched one of the biggest Financial Inclusion Programmes called the ‘Jan Dhan Yojana’ on 28th Aug’14 calling this to be an end to the ‘Financial Untouchability’. The plan aims at connecting every Indian with the financial system which indirectly joins him to the economic mainstream. In his style of extempore speech, Modi compared the works of Mahatma Ghandhi towards the social untouchability to the currently launched plan against financial untouchability. He has emphasized this plan to be a step to fight against poverty. Modi has initiated the spark and this need to catch fire to get implemented in its complete extent and provide the desired result. Though the plan is to connect every person with the bank account, is that by any means helpful in fighting the poverty prevailing on a grand scale in our country? Is the PM’s Jan Dhan Yojana an actual fight against poverty?
Yes
- The plan aims at connecting every household, be it in urban or rural sector and wrap them with the financial cover. This is definitely a step to encourage every citizen to start thinking wisely and plan the finances for the future. A properly planned future w.r.t. the finances would be a big step towards eradicating poverty.
- The programme provides many benefits viz. life cover of Rs. 30,000, RuPay debit card, with an in-built accident insurance cover of Rs 1 lakh and an overdraft facility of Rs. 5,000, subject to satisfactory operations of the account for at least six months. These could be hardly dreamt by any poor in the country.
- For the debit card, a fee of 50 paisa will be charged per transaction, which is very nominal and affordable even by those under the lower socio-economic strata.
- The insurance cover is free for the account holders which imply that the poor class can have the insurance cover and secure the future of their family members and kids.
- This mega financial inclusion programme is a way to teach the financial discipline to all sections of the society. The economic status of the country will have a sound hand with the rise of the poor sections and their joining hands in the financial loops to share the economic burden.
No
- Planning the future and opening a bank account is upto the earnings and expense in the family. These things vary from family to family and we cannot impose the requirement of the bank account to every person.
- A person needs to be literate enough to manage the bank account. Opening an account for an illiterate may lead to some unfair play with the savings of the concerned person. Instead of fighting poverty, this might make the poor person bankrupt without the knowledge of the happenings.
- Government has induced many additional benefits to the opening of the bank account. The government is planning to reimburse banks for these. The amount spent on such plans is nothing but the taxes levied from the common man. This is highly unfair and mis-guiding to spend the hard-earned money of the common man to provide the unwanted lucrative offers.
- The life cover of Rs.30,000 is just for the bank accounts opened by January 26. The poverty can’t have a deadline. With the limited time offer, the administrators have clearly emphasized their intention of attracting their potential customers, and this is no fight against poverty.
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RE: Is the PMs Jan Dhan Yojana a fight against poverty?simran 09-6-2014 03:28 AM
i thnk narendra modi's shiuld try to impriv the condition fr d jod.in india's there is lack of job.if theyvdont hav any job what they should dopsit in their bank acount.now a days increasing unemployment people hav not money to fullfill their need so wat they deposit un their bank acount.i think jan dhan yojna is not a fight against poverty.if modi g want to remov poverty they should try to remove unemployment.
RE: Is the PMs Jan Dhan Yojana a fight against poverty?akanksha singh 09-7-2014 11:43 AM
i think it is a welcome step toward financial inclusion. people will feel a type of financial security as life insurance and accidental covers are there in this programme and hving bank account will prompt him to save more n that is good for economy. this project along with skill development programme if implemented effectively can be a milestone against poverty. but gov must ensure these programmes free from corrupt practices.
RE: Is the PMs Jan Dhan Yojana a fight against poverty?Mukteshwar 09-7-2014 02:17 PM
According to me this new scheme of PM Narendra Modi has more disadvantages than the benifits . As it is said that the account that are being provided to the poor person contains the implicit life insurance cover , i think when the poor person don't have any way to earn the food for his/her family he will try to commit suicide for this insurance cover in the way to proof it as an accident so that his/her family can get that money for the survival . No one knows in how many days they will get that amount or whether his/her family will get that or not it is not sure . according to me PM should utilize this amount for creating new jobs,for creating new vacancies in the existing department for such kind of poor people who are not literate, this money should be used so as to make people eligible to earn money , bank account will come into picture when they wil have money to deposit . Today scenario is such that poor families is not having money to buy food for them for one time how can they save money .
RE: Is the PMs Jan Dhan Yojana a fight against poverty?Mukteshwar 09-7-2014 02:37 PM
There are many other schemes running for the poor people but not a single person came up and said that yes this scheme helped me to survive in poverty . The main cause why all these schemes are not working is because of the disloyal behaviour of the employees that are involved in the various schemes meant for the poor people . According to me scheme should be made such that if the related employee is not loyal then also it should not have any impact on the poor people instead it will come as profit to the poor people . A/c to me there should be a direct number to PM's office regarding any corruptions for everyone and this has to be ensured that necessary actions will be taken on the complaints within 48 hours, this will implicitly increase the vacancies for the literate persons , and on the other side it will help the scheme to have a positive impact on the poor families as well .
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JAN DHAN YOJANA – PROBLEMS AND FLAWS IN IMPLEMENTATIONEconomics — 04 September 2014
Narendra Modi has started ambitious Jan Dhan Yojana to bring crores of poor in financial mainstream. Although the goal is praiseworthy, but there are
realistic problems in the way.
Prime Minister Narendra Modi’s Pradhan Mantri Jan Dhan Yojana has been started with much fanfare. It is an ambitious project to add lower strata of
the country in financial mainstream. This can also provide direct help to beneficiaries from various government schemes. It is still doubtful if these will
actually increase income of poor. Modi says that farmers are committing suicide because moneylenders give loan to them at very high interest rates,
but taking loans from banks also does not change their condition much. Getting loan from local bank is much more troublesome.
Here are some of the features of the scheme. Main aim is to eradicate financial untouchability by opening bank accounts for poor. Right now, 42 per
cent of the population of the country is out of banking system. The under the scheme more than 7.5 crore new bank accounts will be opened by
26th January 2015. It also aims to provide accidental insurance, life insurance and loan facilities. Two-third of the accounts will be opened in rural areas.
There is no minimum balance requirement.
This is a huge task and many bankers feel that it can drain huge resources of already strained industry. According to estimates, banks would have to
spend around Rs. 18,000-20,000 crore on Jan Dhan Yojana. It could be an investment for long term benefits. India spends Rs. 3-4 lakh crore per year
on all subsidies combined. If in the end, even if 10 per cent money could be saved then it will cover entire cost of the operation. As communicated by
the government, each account will have Rs. 5,000 overdraft facility, therefore total exposure would be Rs. 37,500 crore. Assuming 25 per cent risk, we
are talking about Rs. 7,000 crore potential loss for the banking industry.
Some of the finer points of the scheme does not look that good. The insurance cover is linked to the transaction history of the accountholder. RBI
promoted NPCI will bear the insurance cost, not the government, from the income generated from the transactions on the RuPay platform. For every
ATM transaction, the bank will pay NPCI 40 paise. For every sales transaction, NPCI will get 60 paise. Most probably, although the volume of accounts
will increase for banks, but not same can be said about number of transactions.
Last mile connectivity is still a big question mark. According to the plan, this will be taken care by banking correspondents. These agents will go to each
and every village, thus banks will not have to open branches in remote areas. But they are paid as per the commission on the transactions. So until and
unless government plans to include fertilizer, food and kerosene subsidy in it, generating enough commission would be tough task.
Right now, there are two lakh agents working with different banks, but to roll out the entire plan as envisaged would require another five lakh agents to
be recruited. The concept of agents has not worked as efficiently as planned. Therefore recruiting more agents raises questions. However, if new
accounts have to remain active not dormant, then only solution is to increase number of banking correspondents.
When British introduced railway line in India in 19th century, it was basically used to procure raw materials like wood, cotton, indigo, coal etc from India
and ship that to English for further use. Now banks in rural areas are doing same. They are transferring the money deposited to Mumbai. Around 85
per cent of the money deposited in rural branches is sent to Mumbai for loans in urban areas. It would be better if same money is used in those areas
rather than funding for houses or industries in urban areas.
There are two aspects of financial inclusive growth, bank account and access to loan. Jan Dhan Yojana is currently addressing first issue. However
second problem still persists. The current banking system is equipped to disburse loans of lakhs and crores of rupees, not of thousands. The
cooperative institutions which are equipped for such loans are acutely corrupt. Therefore for perfect financial inclusion, the entire banking system has
to undergo overhaul.
Home > knowledge-center > NewsletterStory > Is the Indian banking sector exposed to a systemic risk?
September 05, 2014
In this issue
Is the Indian banking sector exposed to a systemic risk?
Will municipal bonds be able to garner a good response in India?
Are stock markets giving a false hope of global recovery?
India's GDP grows at 5.7% in June quarter. Is it the beginning of a new high-growth phase?
And Other News...
Financial Terms. Simplified.
Weekly Facts
Close Change %Change
BSE Sensex* 27,026.70 388.59 1.46%
Re/US$ 60.37 0.08 0.13%
Gold Rs/10g 27,580.00 -420 -1.50%
Crude ($/barrel) 101.30 0.62 0.62%
FD Rates (1-Yr) 8.00% - 9.00%
Weekly change as on September 04, 2014*BSE Sensex as on September 05, 2014
Is the Indian banking sector exposed to a systemic risk?
Impact
The data of the Capital Adequacy Ratio (CAR) released by the Reserve Bank of India (RBI) is depicting a rather worrisome picture of the Indian banking sector. As of the fiscal year 2014, CAR of Indian banks has dwindled to 13.0% from 13.9% in the previous fiscal. After the reverberations of the U.S. subprime mortgage crisis on the Indian economy, there was some improvement in CAR for couple of years (i.e. until fiscal year 2010), but since then CAR of Indian banks has been on a decline.
You see, the public sector banks are worst hit. Their average CAR has fallen to 11.2% as of fiscal year 2014 and in the present fiscal year as well for the quarter ended June 2014 it has fallen further to 10.7%.
So what is the reason behind this?Well, over the last few years quality of assets of banks in India has come under tremendous pressure by the way of rise in Non-Performing Assets (NPAs). And public sector banks have suffered more than their private sector counter parts. You see, the gross NPAs of public sector bank have increased to 4.1% of the end of March 2014 from 3.6% a year ago. Their net NPAs (as a proportion of their net advances) too have mounted to 2.2% compared to 1.7% during the same period a year ago.
It appears that rising NPAs has become a structural problem of banks - more so with the public sector ones.
The reason for the poor performance of public sector banks, as even cited by RBI is, reckless lending to corporates. Moreover, harmful virus of frauds has gripped the Indian banking sector; wherein there have been instances of misappropriation of funds, syphoning of deposits to cook accounts and corruption at branch level while sanctioning loans (seemingly done in privy with those at the top). Lack of effective internal control system and even political influence has caused leakages in the risk management process leading to frauds and deterioration in quality of assets of banks. Also dual accountability of public sector banks (where they are regulated by RBI as well as the finance ministry) has majorly affected the governance of PSU banks
The remedy...It is noteworthy that a bank can have a robust CAR only when it follows prudent lending practices through a vigilant due diligence process. The Government should take cognisance of this, because such issues pose a long-term systemic risk to the Indian banking sector. You see, the public sector banks account for nearly 70% of total banking activity in the country and their performance can affect the economy as a whole. Therefore, measures to improve corporate governance at banks should be taken.
The PJ Nayak Committee appointed by RBI to review governance of banks in India, submitted a report in May 2014 which has recommended that it would be desirable to separate the position of Chairman & Managing Director (CMD) into two. This is because until then there is a very real possibility of the several chairmen positions across banks being filled on the basis of political allegiance rather than professional skills, which could imperil banks.
PersonalFN is of the view that it is imperative for the finance ministry to also ensure that frauds do not mushroom and they enunciate effective corporate governance guidelines for public sector banks.
Take heed...Going forward public sector banks will require additional capital to comply with the Basel-III norms. According to Government estimates, state-run banks would require Rs 2.4 lakh crore of equity capital by 2018 to meet these norms (which are in effect in a phased manner since April 1, 2013 and which will fully be implemented by March 2019.) Besides, the Government is yet to allocate fresh funds to public sector banks through capital infusion. It is noteworthy that the erstwhile finance minister, Mr P. Chidambaram of the UPA II Government had in the interim budget allocated Rs 11,200 crore for capital infusion...and state-run banks were expecting the present finance minister, Mr Arun Jaitley of the Modi-led-NDA Government to announce additional capital infusion in the Union Budget 2014-15.
These banks are now planning to raise money through Qualified Institutional Placements / Follow-on Public Offers (FPOs), in which case PersonalFN is of the view that investors should be wary of such banks financial health before investing their hard earned money. While there is exuberance in the market as the S&P BSE Sensex has scaled over 27,000 mark and Q1FY15 GDP growth has reported an uptick, it may not be possible for all banks to raise capital effortlessly despite upbeat market sentiments.
Do you think the Government should recapitalise public sectors banks using taxpayers' money? Share your views
Will municipal bonds be able to garner a good response in India?
Impact
Municipal bonds (also known as muni bonds) are a popular issued by local Governments globally. The market for the same globally is estimated to be about U.S. $3.5 trillion.
In India, the first municipal bonds were issued in 1995, while the state-guaranteed bonds were launched by the Bangalore Municipal Corporation in 1997. While a number of municipal corporations (such as Ahmedabad, Ludhiana, Nasik, Nagpur, Indore, Madurai and Visakhapatnam) did issue muni bonds until 2005, there has been a sharp fall in the issuances since then and practically no issues after 2010.
You see, the hurdles by them faced are...
Low ratings;
Reluctant investors;
Municipalities in metros and other large cities resisting to turn to the debt market (as they have sufficient cash); and
Unclear regulation
But now the Securities and Exchange Board of India (SEBI) is planning to float a discussion paper on the issuance and trading of municipal bonds. And to ensure that this is viable, the regulator is also in talks with the finance ministry to ease the norms on pricing of such bonds. SEBI has sought the cap on the coupon rate on such bonds be relaxed if these are issued under the 'tax-free' category. It is noteworthy that according to the tax rules a tax-free debt instrument has to be priced at a minimum stipulated discount to similar-tenured Government securities. Earlier the Association Chambers of Commerce and Industry (ACCI) had also written to RBI to facilitate municipal bonds to be traded.
PersonalFN is of the view that municipal corporations of tier III and IV cities which in need of capital depend on Housing and Urban Development Corporation (HUDCO) for funding, will largely benefit if SEBI discussion paper fructifies effectively as they will have access to the debt markets. This in turn may also local Governments to develop decent infrastructure in the form of roads, sewage systems, schools and hospitals. Moreover, if a tax-free status is provided for such bonds it may make it a tax-efficient investment avenue under debt as an asset class. However, in a rising interest rate scenario the capped coupon of such bonds may deter investors from putting their hard earned money in municipal bonds.
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Are stock markets giving a false hope of global recovery?
Impact
Risk appetite is high across the globe; markets are in a bit brazen mood. Investors are chasing stocks. Emerging markets are shining again. Speaking about India, markets are hitting highs quite regularly these days. You may be enjoying the up move if you have invested money in stocks or equity mutual funds; or you might be repenting for not having invested money when markets were really down. Equity markets in developed countries such as the United States, Germany, France and Japan have not only recovered from the lows of 2008 but are now near their 5-year high levels. Except for Russia, investors are still very optimistic
about other emerging markets. Well, everything looks a lot encouraging, but what has much really changed on ground?
State of global economyMarkets across geographies have been rising on the hope that, growth will come back. However, the ground reality is, engine of global growth seems to have lost the steam. Despite of spending billions on stimulus packages what the developed world has achieved is minuscule. The recently released economic data, not only in just one region but across geographies may not appear encouraging, yet markets are bullish.
To check the ground realities of the global economy and read PersonalFN's view please click here.
India's GDP grows at 5.7% in June quarter. Is it the beginning of a new high-growth phase?
Impact
Investors have high expectations from the Indian economy under the Modi-led-NDA regime and are betting big on India. Both equity and debt markets have been hoping better days ahead. While it may take a little longer before Indian economy passes the litmus test of strong recovery, some green shoots are instilling confidence.
After languishing a for quite a long, in the April-June quarter of the fiscal year (Q1FY15) India's Gross Domestic Product (GDP) witnessed a growth of 5.7% - the fastest rate recorded over last 9 quarters and depicted signs of breaking shackles.
Is Indian economy on a take-off?
(Source: CSO, PersonalFN Research)
You see, in Q1FY14 (i.e. over April-June quarter of last fiscal year), the Indian economy grew at 4.7% and for the entire fiscal year 2014 economic growth on average basis came near that level. Thus against this backdrop, Q1FY15 GDP growth rate of 5.7% looks encouraging.
To read more about this news and PersonalFN's views on it, please click here.
And Other News...
The Modi-led-NDA Government last week rolled out its ambitious financial inclusion programme, the Pradhan Mantri
Jan Dhan Yojana (PMJDY) which turned to be blockbuster on the very first day. More than 1.5 crore accounts were opened exceeding the day one target of 1 crore accounts and touched 2.5 crore accounts in subsequent few days.
So what does PMDJY offer?
o Two bank accounts each to poor families (including one to a woman family member);
o An overdraft facility of Rs 5,000 (based on the economic activity and subject to review of the account in the
next six months since account opening);
o Ru-pay enabled debit card
o Accident insurance cover of Rs 1 lakh; and
o Life insurance cover of Rs 30,000
The programme is aimed at improving the lives of millions by bringing them into the financial mainstream and possibly even freeing them from unreasonable moneylenders.
"In order to eradicate poverty we have to get rid of financial untouchability," Prime Minister Mr Narendra Modi said, adding that inclusion will also act as an important tool in the fight against corruption. He also said the programme would break the vicious cycle of poverty and debt and boost the economy, which slowed to decade lows in the past two years.
Mr Aditya Gupta, Chief Operating Officer (COO) of TranServ, a leading prepaid payments solutions manager that focuses on exploring the potential use of prepaid cards towards achieving Financial Inclusion; also shares a similar view by saying "The Pradhan Mantri Jan Dhan Yojana is a giant leap forward for an economy like ours, given that it will not only provide banking & insurance coverage to around 75 million identified households, but should also boost the GDP significantly as the programme will lead to reduced leakages, better tax collection and improved savings." He is also of view that nationwide, integrated access to sophisticated financial products like banking facilities, account opening, availability of credit, micro insurance and pension alongside the proposed direct transfer of benefits will only heighten the need for the use of innovative technologies within the system.
PersonalFN is of the view that while it is a good initiative, the Government should ensure that misuse of such programme is prevented and the account opening should undergo proper KYC screening although the Government is buoyed by the response thus far. Moreover, it is imperative that accounts opened under PMJDY are active in operations (in terms of number of transaction) for the benefits to transpire meaningfully.
Financial Terms. Simplified.
Capital Adequacy Ratio: A measure of a bank's capital. It is expressed as a percentage of a bank's risk weighted credit exposures. This ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world.
(Source: Investopedia)
Quote : "The basic story remains simple and never-ending. Stocks aren't lottery tickets. There's a company attached to every share." - Peter Lynch
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NEWS » KERALA
Published: MONDAY, JANUARY 26, 2015
Tap investment for socio-economic growth: Governor
Thiruvananthapuram: Joining the nation in celebrating the 66th Republic Day, Kerala Governor Justice P Sathasivam on Monday
asked the state government to come out with innovative models of development to utilise the inflow of investment and funds for
socio-economic growth.
'Government has approved a detailed scheme for resource mobilisation to the tune of Rs 25,000 crore to meet investment
requirements for basic infrastructure development and funding projects,' he said in his address after unfurling the national flag and
inspecting the ceremonial parade at the Central Stadium here.
'Bank deposits by Non-Resident Keralites are set to reach enormous proportion, following higher remittance in recent days.
Innovative models of development may be designed to leverage this inflow of funds, to the socio-economic growth of the state,' he
said.
He, however, emphasised the importance of securing 'green nod' from authorities concerned before embarking on mining and
quarrying operantions.
'Kerala has a lot of ecologically fragile areas. We should take maximum care to secure the green nod from concerned authorities
before embarking on mining and quarrying operations. Issuance of new permits should be done only after obtaining clearance from
the concerned statutory authorities,' he said.
Transparency should be ensured in all governmental activities, he said, adding 'those at the helm of affairs should be both credible
and accountable in whatever they do and say.'
The Governor also lavished praises on Prime Minister Narendra Modi.
'The Prime Minister has upheld the vision of a transformed India where the government becomes an enabler of growth with such
initiatives as Swachh Bharat Mission, Jan Dhan Yojana, Make in India and Digital India which are at once far-sighted and result-
oriented,' he said.
Besides contingents of armed forces, Border Security Force, Central Reserve Police, Railway Protection Force, Special Armed
Force and India Reserve Battalion, cadets of NCC, student police cadet and Bharat scouts and Guides and mounted police also
took part in the parade.
Chief Minister Oommen Chandy and senior civil and police personnel were present.
Republic Day celebrations were also held in district headquarters across the state.
In Kochi, Acting Chief Justice of Kerala High Court, Justice Ashok Bhushan unfurled the national flag and delivered the Republic
Day message.
Southern Naval Command celebrated the Republic Day with a parade reviewed by Vice Admiral S P S Cheema, Flag Officer
Commanding in Chief, Southern Naval Command. He also paid tributes at the War Memorial.
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Empowering poor vide PM Jan Dhan YojnaPosted on September 12, 2014 by Uttam Gupta
In India, tens of thousands of farmers commit suicide every year. An overarching cause in majority of the cases is they are heavily indebted
and inability to pay back to money lender forces them to the extreme step as they can’t bear consequential torture and exploitation.
The agony is palpating in instances whereby even a small loan taken by farmer or a landless laborer from money lender gets transformed in to
mountain of debt as interest charged by latter is exorbitant – 4-5 times higher than what the banks charge.
At another level, consider a woman at home who struggles hard to keep her earnings safe even as her die-hard alcoholic husband looks for
every possible opportunity to pounce. Eventually, the cash gets frittered in giving vent to dastardly habits of latter.
Think of the only earning person of a poor family – a factory worker or landless worker on field – who dies in an accident. In the absence of
financial security, the dependent members are forced in to persistent misery for their entire life span.
Those who are a shade better-off and in a position to save some amount – after meeting their expenses – have no avenue available to invest
for a reasonable return. They are neither able to contribute nor benefit from economic activities.
Government extends financial support to vulnerable sections through a host of welfare schemes and subsidies. Under existing arrangements,
a lot of this money gets pilfered. The beneficiaries also face lot of hassles and even harassment at the hands of officials in getting their
entitlement released.
The financial miseries of a vast majority of people can be traced to absence of banking facilities in large parts of India. Nearly 40% of
population or 500 million do not have a bank account. More than 6 decades since independence, they continue to be condemned to ‘financial
exclusion’.
Speaking from the ramparts of historic Red Fort on Independence Day August 15, prime minister, Modi lamented ‘we may have got rid of
social untouchability, but a vast majority of people of India continue to be afflicted by evil of what he termed as ‘financial untouchability’.
GO
To make a dent on this pernicious problem, he announced ‘Pradhan Mantri Jan Dhan Yojana (PMJDY)’ and in less than a fortnight thereafter
launched it on August 28. PMJDY is a mammoth nation-wide financial inclusion project that seeks to bring every household in India within the
ambit of the banking system.
Under it, 75 million families will open an account each with ‘zero’ balance and get a RuPay debit card. It will come with an overdraft facility of
Rs 5000/- and an accident insurance cover of Rs 100,000/- . Persons opening account before January, 2015 will also get life cover for Rs
30,000/-. In second phase, number of accounts will be increased to 150 million.
On the day of launch itself, 15 million accounts were opened. By September 8, this figure had already doubled to 30 million thereby
demonstrating huge success of the scheme. Banks are pretty confident that the 75 million target will be reached by January, 2015.
The project will create sustainable opportunities for improving economic well being of poor. By making loans available at affordable interest
rates, this will liberate them from the shackles of money lender. The lady at home need not fear and can keep her money safe in the bank.
She can leverage this to boost her savings for contingencies.
The green shoots are already visible. People have put in around Rs 1500 crores in these ‘no-frills’ accounts. Based on feedback received from
banks, financial services secretary exudes confidence that within a year, total collections will touch Rs 15,000 crores.
Any apprehension that Rs 5000/- overdraft could be drain on banks resources is without basis. How much an account holder will get? This has
been left to discretion of bank. Moreover, fresh loan will be given only after previous drawl has been repaid.
Given initial trends, majority of accounts will have some balance. So, a person will be drawing his own money. Far from making a dent on their
balance sheets, banks will have access to cheap money thereby opening up new window for increasing their profits. It will be a win-win for
both the poor and banks.
The RuPay card which has all the features of widely used international credit/debit card, will give to the poor much needed safety and
flexibility in conducting their purchases and availing various services. This will also reinforce their confidence.
When, life is at serious risk every moment, accident cover of Rs 100,000/- available at no cost will be a big boost to financial security of the
poor. For millions of workers in ‘informal’ sector who have no social security cover, this offers unprecedented comfort.
Government gives huge amounts of subsidies (around Rs 300,000 crores annually on food, fertilizers and fuel alone) besides welfare
entitlements like scholarships, educational allowance, pension etc . Thanks to the leakages, inefficiency and corruption in our governance
structures, a major slice of the subsidies does not even reach the beneficiaries.
PMJDY will create the much needed foolproof financial architecture to ensure that subsidies and other forms of financial assistance reach in full
to the target beneficiaries. Modi himself is taking keen interest and has already ordered a public financial management system (PFMS) to be
put in place for this purpose. PFMS will track money flow and ensure that it gets credited to beneficiary’s account.
Finance minister, Arun Jaitely has given a clear indication of government’s intention to transit from extant dispensation to a system of direct
cash transfer to poor. The expenditure management commission (EMC) under Dr Bimal Jalan is expected to come out with a road-map before
end of current fiscal.
Such humongous amounts channeled through banks will give more incentive to them for expanding their reach thereby contributing to
economic empowerment of millions who have thus far been treated as financial un-touchable.
The economy will also gain by way of elimination of pilferage and a lot of subsidy amount that is currently mis-directed. Resultant savings in
expenditure will help in lowering fiscal deficit, government borrowings, interest rate and inflation.
In a nutshell, PMJDY is a historic ‘financial inclusion’ scheme that will unfold numerous opportunities for millions of weaker sections of society
to improve their economic status and contribute to enhancing GDP growth.
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Jan Dhan Yojana- NDA's first step to financial security...Asked Sep 2, 2014
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15 August 2014 marked a very important day in India’s History. It symbolized the heralding of a new era of financial security and
inclusion. With a fresh new government up in power and new policies and plans were obvious expectations. As the prime minister of
the largest democracy of the world took the podium the country looked on with abated breath. The declaration of the policy that
followed brought a gust of relief and joy to the lives of the hundreds of thousands poor families across the country.
The Jan Dhan Yojana, an approach to comprehensive financial inclusion is truly a very promising prospect for the country today.
Financial Inclusion basically refers to easy accessibility of financial services at affordable costs to the disadvantaged and low earning
sectors of society. The campaign to bring the masses closer to the financial system could improve measurements of economic growth
and bolster Modi's popularity among the poor.
Under the scheme, the government will give account holders a debit card and accident insurance cover of up to 100,000 rupees
($1,654). Good customers would also be eligible for an overdraft facility of up to 5,000 Indian rupees after six months. Those who open
an account by January 26,2015 will be given life insurance cover of Rs 30,000. All companies and banks have been collaborated with for
the development of Mobile Banking platforms for non-smartphone users.
According to minority affairs minister Najma Heptulla, about 42% or 10 crore households out of 24.64 crore don't have access to
banking facilities. About 45% of 16.76 crore rural households and 33% of 7.88 crore urban households don't have bank accounts.
On the first day (28 August) itself the plan showed silver linings by the opening of a staggering 1.5 crore bank accounts across 77,852
special camps held throughout the country. In spite of the early plan faces questions about the difficulties of keeping the accounts
alive, funding the overdraft mechanism and resolving the confusion over the insurance cover.
Whether the plan will be successful or not only time will tell but for now it looks very promising and is a very bold and confident move
from the Government’s side.
PM unveils Jan Dhan Yojana to encourage poor to open bank A/cBY : PTIUPDATED ON : Friday, August 15, 2014 04:03(IST)
TweetNew Delhi :-Seeking to integrate the poor into formal banking channel, Prime Minister Narendra Modi today announced ‘Pradhan Mantri Jan Dhan Yojana’ under which they will be provided a bank account with the facility of a debit card and a built-in insurance cover of Rs 1 lakh.
“We want to integrate the poorest of the poor with bank accounts with Pradhan Mantri Jan Dhan Yojana,” he said in his maiden Independence Day address to the nation.
Modi said it is essential to provide banking services to the poor people, especially farmers, to save them from the clutches of moneylenders.
“Why are farmers committing suicide? They take loan from money lenders, cannot repay money and commit suicide. For daughter’s marriage, they take loans from moneylenders, then their life is full of miseries. Who will protect those poor families?,” he questioned.
Observing that people have mobile phones but not bank accounts, Modi said, the scheme will help in bringing the benefits of formal banking system to them.
“Today there are crores of families which have mobile phones but no bank accounts. We have to change this. The economic development must benefit poor and it should start from here,” he said.
Under the Jan Dhan Yojana, he said, “the person who will open bank account will get a debit card and the family will get Rs 1 lakh insurance cover. This will help the family to tide over the unforeseen eventuality.”
About two-fifths of Indians lack a bank account.
Commenting on the announcement, CII Director General Chandrajit Banerjee said “this will bring in more people into the formal banking channels”.
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Wednesday, March 4, 2015
NPCI to come out with virtual form of RuPay debit cardAfter launching the RuPay debit card, National Payments Corp (NPCI) is set to come out with its virtual form in the next few months, a move that will give further push to smartphone-based transactions.
"We are planning to go for pilot of a virtual RuPay card over the next 4-5 months," NPCI Managing Director and Chief Executive A P Hota said here today.
NPCI is the nodal agency for all retail payment systems under the Jan Dhan scheme.The physical plastic RuPay card carries a 16-digit number. Under the virtual form, there will be no need of a physical card and a transaction can be done with the help of the 16-digit number alone.The initiative will enable all account-holders send and receive money from their smartphones with a single identifier which may include the Aadhaar number, mobile number or virtual payment address without entering any bank account information.
Average value of the card payment system per head as on date was Rs 1,500 and an average remittance stands at Rs 2,500. Under the new virtual system, the amount would be much less and may include school fee and grocery payments, he said.
The proposed payments banks are likely to provide this virtual card facility from the beginning, Hota said. "The specifications standards are now available for payments banks and hence it is a great opportunity for them."
Around Rs 8,000 crore worth of transactions are taking place through IMPS (immediate payment service) per month. What we are doing now is just putting another extra layer on the already existing system so as to make transaction more easy, Hota explained.
Currently, only around 20 per cent of the total transactions are happening through IMPS and hence NPCI is working on further simplification of the facility so as to make it more popular in future, he added.
Talking about authentication system for the virtual RuPay card, former Chairman of UIDAI Nandan Nilekani said "with everybody having cellphones, going forward the single- factor authentication can be the cellphone, replacing the physical cards."
"Later, Aadhaar-based authentication will come on mobile phone in 12-18 months. Second factor of authentication will be the Aadhaar number. We hope millions of transactions to take place through this mode in the country in days to come," Nilekani said.
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Saturday, January 24, 2015
Next phase of Jan-Dhan to offer a range of insurance, pension services
PM Narendra Modi said the banks should redouble efforts in financial literacy and seeding of Aadhar numbers with bank accounts needs to
improve.
Prime Minister Narendra Modi on Saturday outlined the next phase of the Jan-Dhan Yojana to include credit, insurance and pension as he
complimented bankers for near 100% coverage of households under the massive financial inclusion drive.
The Pradhan Mantri Jan-Dhan Yojana is a key policy plank of the Modi administration's vow to eradicate what it calls "financial
untouchability". Each bank account comes with an accident insurance cover, a RuPay debit card and a life insurance policy of Rs 1 lakh.
Account holders will also be provided an overdraft facility of Rs 5,000 later. "Well begun is half done. The Pradhan Mantri Jan-Dhan
Yojana provides a platform for changing the economic condition of our people," Modi told bankers in his email.
"We need to build on this success and leverage these accounts to provide our citizens a wide range of credit, insurance and pension services. We also need to maintain high standards of customer service. This is the next phase of Pradhan Mantri Jan-Dhan Yojana," the PM said. He said the target set for opening bank accounts for all households has been surpassed well ahead of the target date of January 26, 2015. "By opening 11.5 crore new accounts in a very short span, we have achieved a coverage of 99.74% of all households in the country. I
congratulate you for your extraordinary efforts," the PM said in his email.
He said doubts were expressed when the drive was launched but the bankers had proved skeptics wrong by achieving "what appeared to be
impossible".
"This feat alone should motivate you, as well as others to work to make our dreams a reality," the PM said. Modi said the banks should redouble efforts in financial literacy and seeding of Aadhar numbers with bank accounts needs to improve. "Bank Mitras need to be enabled
to carry out RuPay card and Aadhaar enabled transactions in villages itself," the PM said.
"I want you to work to ensure that each account holder enrolls for Aadhaar and seeds it in the bank account. This needs to be done for all
accounts. I am sure you will do this seeding with the same zeal you showed in driving bank account opening," he said,
He said most development activities were hindered by the single disability of not having bank accounts but now that it been overcome, "benefits have already started flowing to people through some of the "direct benefit transfer" schemes. This not only ensures that benefits reach people directly, but also utilizes your accounts well," he said. "This is your great contribution to nation-building. We will ensure that many more schemes utilize the DBT platform," he said.
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Tuesday, January 20, 2015
11.5 crore Jan Dhan accounts opened; New Guiness Book of World Record: Most of India is banked: Jaitley
"Most of India today is included in the banking system," Jaitley said, adding that more than Rs 9,000 crore has been deposited in the Jan Dhan accounts.
As many as 11.5 crore bank accounts have been opened under the Pradhan Mantri Jan Dhan Yojana, exceeding the enhanced target of
10 crore and covering 99.74 per cent of households, finance minister Arun Jaitley said today.
"Most of India today is included in the banking system," he said, adding that more than Rs 9,000 crore has been deposited in the Jan Dhan accounts.
Prime Minister Narendra Modi announced the financial inclusion scheme in his first Independence Day speech last year. It was launched in August with a target to open bank accounts for 7.5 crore poor persons by January 26, 2015. The target was later increased to 10 crore
accounts.
Addressing a press conference here, Jaitley said the government would use these bank accounts to pass on benefits to individuals under its
various social security schemes.
Financial Services Secretary Hasmukh Adhia said that even Guinness Book of World Records has recognized the achievements made under Pradhan Mantri Jan Dhan Yojana.
In its citation, the Guinness Book said: "Most bank accounts opened in one week as part of the Financial Inclusion Campaign is 18,096,130
and was achieved by the Department of Financial Services, Government of India from August 23 to 29, 2014."
Exclusion of a large number of people from the banking network was inhibiting growth, Jaitley said. "Financial Inclusion is one of the top most
priorities of the government.PMJDY is the biggest financial inclusion initiative in the world."
He said that out of the accounts opened, 60 per cent are in the rural areas and 40 per cent in the urban areas. Share of female account
holders is about 51 per cent.
Jaitley said that RuPay cards have been issued to more than 10 crore beneficiaries who will get a benefit of personal accidental insurance of Rs 1 lakh besides a life insurance cover of Rs 30,000 for eligible beneficiaries.
Describing the scheme as "a game changer for the economy", the minister said that it would provide the platform for Direct Benefits Transfer
(DBT) and help in plugging leakages in subsidies.
Overall, public sector banks alone opened 9.11 crore accounts under PMJDY, followed by regional rural banks which opened about 2.01 crore accounts. On the other hand, 13 private sector banks together open just 37.58 lakh accounts.
According to Adhia, all these accounts are being used for payment of wages under the MNREGA scheme and LPG subsidy. More than Rs
33,000 crore towards MNREGA, LPG and other benefits will be routed through the bank accounts annually.
On the future of the scheme after January 26, Jaitley said the government will take a view on it later.
Responding to a question of duplication of accounts, the minister admitted that there might be some such cases and that was the reason for
enhancing the target to 10 crore accounts.
The issuance of the RuPay cards to account holders would encourage use of plastic money and help in moving towards a cashless society,
Jaitley said.
The proposal to provide overdraft facility in such accounts would also act as micro finance and prevent people from taking loans at exorbitant
rates from money lenders.
Jaitley said that most of the country has been covered by the PMJDY, except those areas which have poor connectivity, are impacted by
left-wing extremist and are inaccessible.
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Sunday, January 11, 2015
Private banks lag behind PSU lenders in opening Jan Dhan a/c
Private sector banks are way behind their PSU peers when it comes to opening financial inclusion accounts under thePrime Minister's Jan Dhan Yojana,with just about 30 lakh in over four months.
The state-owned banks have opened 8.62 crore such accounts in the same period. The number of such accounts opened by even regional rural banks stands at 1.92 crore.
Private banks have a market share of about 20 percent, but their contribution in this flagship financial inclusion programme of the government is only about three percent.
As per the latest Finance Ministry data, 13 private sector banks have opened 30.47 lakhJan Dhan bank accounts as against 8.62 crore
by state-owned banks as on January 7.
Prime Minister Narendra Modi launched the financial inclusion scheme on August 28, 2014. The initial target was to open 7.5 crore such
accounts, but the later it was revised upwards to 10 crore to be completed by January 26, 2015. However, this target has already been achieved.
Taking into account the regional rural banks, so far a total of 10.84 crore Jan Dhan accounts have been opened so far by all banks in the country.
Among private banks, just three of them -- HDFC Bank, ICICI Bank and J&K Bank -- account for about two-third of total accounts opened
by private sector lenders.
HDFC Bank has opened 7.8 lakh such accounts, followed by ICICI Bank's 6.67 lakh and Jammu and Kashmir Bank's 6.06 lakh.
Country's third largest private sector lender Axis Bank have opened 2.45 lakh accounts and Kotak Mahindra Bank has opened just 54,000
accounts.
As far as public sector banks are concerned, they have opened more than 8.62 crore Jan Dhan accounts.
Country's largest bank SBI has opened 2.15 crore accounts, followed by Punjab National Bank (61.74 lakh), Bank of Baroda (58.47 lakh), and Canara Bank (53.79 lakh).
The main features of the PMJDY scheme include Rs 5,000 overdraft facility for Aadhaar-linked accounts, RuPay Debit Card with inbuilt Rs 1 lakh accident insurance cover.
Besides, account holders under the scheme will get life insurance cover of Rs 30,000. This was additional benefit announced by the Prime
Minister during the launch of the scheme.
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FM: Benefits of Demographic Dividend will flow only if our Population is Healthy, Educated and Properly SkilledMeets Representatives of Social Infrastructure, Human Capital and Development Groups as Part of his Pre Budget Consultative Meeting
The Union Finance Minister Shri Arun Jaitley said that apart from on-going schemes and programmes for the marginalized and vulnerable section of the society, the Government has initiated various special social sector programmes. He said that these programmes among others
include Swacch Bharat Mission (Gramin), which will set the base for improving sanitation and health standards; Pradhan Mantri Jan Dhan
Yojana (PMJDY)and RuPay debit card which will extend financial inclusion and give financial empowerment to the account holders at
large.
The Finance Minister, Shri Jaitley was making his Opening Remarks during the Pre Budget Consultative Meeting with the representatives of Social Infrastructure, Human Capital and Development Groups. He said that more than 63% of the population is in the age group of 15-59 years, broadly termed as India's demographic dividend. He said while this young population provides India a great opportunity, but it also poses a great challenge to the Government. He said that benefits will flow only if our population is healthy, educated and properly skilled. In this context, he said that investments, especially in social infrastructure that build-up human capital are crucial. Shri Jaitley said that India needs to take advantage of this demographic window in the next couple of decades and garner its benefits.
Therefore, the Finance Minister said that his Government has put thrust on skill development as well as on 'Make in India' as the Government's endeavour to improve employability and create large employment avenues for the youth among others. He said that skill development has been given focused attention for which a dedicated Department of Skill Development and Entrepreneurship has been created in the Central Government. He said that the challenge for the country now is in planning and acting towards converting its potential demographic force for enhancing opportunities of growth by dovetailing the quality of manpower to the requirements of employers, both domestic and international.
The Union Finance Minister Shri Arun Jaitley said that emerging trends indicate the growth deceleration in India has bottomed-out. The Finance Minister said that significant downward trend in inflation has also been recorded in the second and third quarter of 2014-15. He said that external environment has also largely turned in India's favour. In such a back drop, the Finance Minister said that domestic policies to achieve macro-economic balance and the on-going process of economic reforms would lend further strength to the recovery of the economy.
Various suggestions were received from the representatives of the different social sector groups during the meeting. Major recommendations include that immediate steps be taken in the budget to prevent any scope of diversion and misallocation of funds meant for the benefit of dalits and adivasis. This will result in about Rs. 30,000 crore to be available for the development of Scheduled Caste and Scheduled Tribes. Other suggestions include to set apart in the coming budget the entire 16.2% for Scheduled Castes and 8.2% for Scheduled Tribes, establishment of well designed and dedicated institutional mechanism for Schedule Caste Sub Plans (SCSPs) Tribal Sub Plans (TSPs) separately at the Centre and State levels, creation of a separate unit within Niti Ayog with power to review, monitor and direct to ensure effective implementation of the SCSP and TSP as well as setting-up of a nodal unit headed by a Joint Secretary with the responsibility of preparation of Annual SCSP Plans and their subsequent implementation.
Other suggestions include adequate allocation for ICDS budget, Mid Day Meal Scheme and for the programmes for the nutrition of mother and child under Food Security Act as well as clear demarcation of funds to remove malnutrition among children of dalits and adivasis etc. Besides this, there was suggestion for budget transparency at local level in order to have better utilization of funds and results of various social welfare schemes at the grass root level etc.
Other suggestions made during the aforesaid meeting include that a mechanism needs to be built to develop entrepreneurship among dalits, schemes to be brought out for developing art and culture of dalit and adivasi communities. Suggestions were also made about proper implementation of Prevention of Domestic Violence against Women Act, appointment of women protection officers, increasing the scope of Nirbhaya Fund to cover the domestic violence against women etc. A suggestion was made that Finance Minister may include a statement in his Budget Speech condemning violence against women showing unequivocal commitment of the Government in this regard.
Some suggestions were also made on investment on youth, especially from those of socially excluded communities, investment in skill and entrepreneurship building, more spending on education and social enterprises, inclusion of youth leadership in CSR activities, higher spending to change the social mindset of people against the use of toilets etc.
Other suggestions include adoption and implementation of the National Competition Policy to push the growth on higher trajectory, adoption and implementation of Public Procurement Act. As public procurement accounts for almost 30% of the total GDP worth US $136 billion annually, therefore, Public Procurement Act would help in promoting the good governance by curbing corruption in public procurement; and adoption of a National Public Procurement Policy; adoption and implementation of Financial Consumer Protection Act, fixing of fiscal management practices by establishment of Parliamentary Budget Office, adoption of international best practices in budgetary planning and reduction of non-merit subsidies among others.
In end, suggestions were also made for enhancement of allocation to education with an emphasis on making functional investment in early childhood and elementary education, enhanced allocation to education to 6% of GDP in line with Kothari Commission and National Education Policy recommendations and enhance allocation to elementary education by 1% to accommodate a cumulative gap in education, enhanced allocation to areas with strongest implications on quality-availability of teaching learning materials, improved libraries and strengthening of the capacity of the resource unit at the cluster level, enhance allocation for research, monitoring and evaluation, address gaps in financial and planning process to ensure full expenditure of allocated funds in education sector among others.
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Sunday, January 4, 2015
10 crore Jan Dhan accounts, 73% zero balancePUNE: The government on Friday said that banks had gone past the target of opening 10 crore Jan Dhan accounts and had managed to
cover 98% of the households, prompting to now launch a "challenge" to find out if any family remained without access to basicbanking facility.
In recent weeks, there has also been a significant increase in the funds deposited in theJan Dhan accounts with the corpus in the 10.36
crore accounts going past Rs 8,000 crore, according to data available with the finance ministry. But 7.6 crore account holders, which is around 73% of all Jan Dhan accounts, had zero balance on December 30.
"We had done surveys and it shows that across several states we have achieved 100% household coverage. There are some households that are not allowing us access so we will launch a challenge to help find out if there are households that still do not have coverage," financial services secretary Hasmukh Adhia said on the sidelines of the Banker's Retreat here.
He clarified that of the 25 crore households in the census, around 22 crore households had participated in the survey conducted by banks and the percentage of households was based on these. He said that the three-odd crore households lived in gated communities and affluent areas and didn't need help in opening accounts.
In August, the Narendra Modi government launched an ambitious plan to provide all households with a bank account and had hoped to
open 7.5 crore accounts by January. But the target was achieved much earlier and the government realized that all households were still not covered, prompting it to scale the target, which has now been achieved.
The household coverage report available with the government showed that there are few states such as Manipur (78%), Nagaland (76%), Meghalaya (83%), Arunachal Pradesh (84%), Odisha (86%), Sikkim (89%) and Jammu & Kashmir (89%) which still have a large number of households without access to a bank account. But several of the traditional laggards such as Bihar, West Bengal and Uttar Pradesh have near universal coverage.
In some of the districts such as Meghalaya's East Jaintia Hills and South West Khasi Hills, there is zero coverage. Adhia told TOI that special attempts will be made to reach to this population so that no one is left behind. In addition, he said that banks are being asked to sensitize
account holders about using the RuPay debit card within the first 45 days so that they are entitled to the insurance facility.
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Jan Dhan: enrolees over 60 short-changed on life coverA RuPay card under the Jan Dhan scheme may not be enough for nominees to get the death benefit of 30,000 when an account holder ₹passes away. Some nominees found this out recently, to their surprise.
Gowramma (name changed), from Karnataka, passed away recently. State Bank of Mysore, where she is a Jan Dhan account holder, rejected the nominee’s claim for the death benefit of 30,000 as the deceased was above 60 years of age.₹
According to the Finance Ministry approved norms for life cover under the Jan Dhan scheme, the eligibility for risk cover ceases when a person turns 60.
These guidelines were framed long after the launch of the scheme and many elderly people had enrolled for the same when it was launched by Prime Minister Narendra Modi in late August. Under the current norms, the account holder will have to exit the life insurance scheme the day he or she turns 60.
State Bank of Mysore has till date received four cases each claiming death benefit of 30,000 under the scheme.₹
Of them, two claims were rejected straightaway as the deceased were aged above 60, sources in the bank said.
The claims for the other two cases are being processed though the bank is not clear as to which LIC office the claim papers have to be sent for final settlement.
Confusion over claims
Public sector banks are in a state of confusion on the issue of handling claims. Even accident insurance claims are reaching the doorsteps of these banks.
Although the banks have till date issued 8.4 crore RuPay cards for over 10 crore Jan Dhan accounts, they do not want to foot the death
benefit bill for the life cover. They are only keen on having a foolproof mechanism to pass on the claims to Life Insurance Corporation. Both LIC and the public sector banks are yet to firm up a seamless mechanism for claims settlement under the life cover promised under scheme.
Meeting held
On Wednesday, representatives of the Finance Ministry, Indian Banks’ Association and public sector banks held a meeting to discuss the
nitty-gritty of claims settlement for the 30,000 death benefit promised under the scheme.₹
There is a need to map LIC branches with those of the banks so that claims could be processed seamlessly, said the chief executive of a
public sector bank.
Currently, banks are not fully aware about how to take the process forward in case nominees come up with claims.
Indications are that the nominees will now be asked to furnish an affidavit confirming that the deceased was the head of the family or that he/she was an earning member of the family, and in the age group of 18-59.
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Monday, December 29, 2014
RuPay debit cards could be the Jan Dhan Yojana’s undoing
The lack of formal banking and cash is one of the toughest constraints in the rural areas of India. The Jan Dhan Yojana might be the best
strategy to overcome this. But this ambitious scheme has one critical flaw that could ruin it and result in its failure to deliver on promises: the
RuPay debit card. To ensure the success of the yojana, it is essential that the RuPay debit card plan be shelved, because it poses a huge
reputation risk — the failure of the card could have damaging consequences for the scheme as a whole.
For families which have been offered bank accounts under the scheme, the advantages of a cash-based economy are just a step away. Except in the case of the lowest deciles, poor families do have some assets but, in the absence of a ready market for them, they are forced to make distress sales for even routine transactions. Having cash in the bank and, more importantly, a way to easily deposit and withdraw money, will be a force-changer for these families once the banking habit spreads.
The weakness in the system comes from the introduction of the debit card. It introduces the risk of a third party meddling with the savings bank deposits of crores of first-time account users. Earlier government programmes have become non-starters for similar reasons. But before going into this in detail, just imagine the landscape the debit card would create for new bank account holders. Recollect the tense
times we went through when we first got cards — debit or credit. Recollect those tentative moments eons ago, when we operated an ATM
machine for the first time.
In lakhs of villages across India, instead of offering frugal banking, we are trying to replicate these experiences. The debit card has to be preserved, kept reasonably dust free and intact for its magnetic strip to operate. Though the account won’t be frozen if the card is not used, the accident insurance cover gets cancelled if it is inactive for 45 days.
But this isn’t the chief obstacle. Repeated observations of auditors and independent studies about previous government schemes throw up two concerns. First, there is always one stage or point at which the beneficiary has to approach the district administration or the bank to get
into the scheme. This is the point at which money could leak out of the scheme. The second concern is complication. The RBI list of
frequently asked questions on the Jan Dhan Yojana, sent to all banks, acknowledges this — the “branch manager will have to advise all the
related risks to the illiterate account-holder at the time of issuance of RuPay card”. The RuPay debit card is in line to be the leakage point
from the scheme. It has the weakness of being complex and requiring a third party to administer.
The results could be devastating. Remember, for instance, in the Integrated Rural Development Programme, the loan scheme had two
components: a subsidy provided by the government and a loan given by the bank. People may recall the standing instructions issued by bank headquarters to hand over the subsidy to the district or zila parishad representative but not to disburse the loan. The recipient got some money, the officials took a cut, and there was no pressure to repay a loan.
The Jan Dhan overdraft could meet the same fate, of being parcelled out, with the account holder getting the smallest share. To reduce the
hassle and risk of keeping the card with themselves, a sizeable percentage of people, typically the weakest, might give it to someone else for safekeeping — a village leader or the bank manager. This is a real risk. The account holder knows if she does not put more money in the bank, she is safe from further loss, so, she will keep her account dry. Yet the safekeepers could purloin the account holder’s share of government subsidy.
The RuPay debit card’s problem is that it is a physical object and, like any government property, lends itself to widespread misuse. A far
better option would have been a frugal banking plan based solely on a single-number platform like Aadhaar, with biometric identification, or
a telecom number-based identification platform like M-Pesa for the Jan Dhan account holders to remember and use. Every benefit could have been credited to this account.
The debit card adds nothing to the experience of operating a bank account for the new entrant but has all the elements necessary to wreck
it.
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Monday, December 22, 2014
7 things to know about Pradhan Mantri Jan Dhan Yojana
New Delhi: On 15th August 2014, Prime Minister Narendra Modi, from the historic Red Fort, had announced the launch of Pradhan Mantri
Jan Dhan Yojana (PMJDY). The primary aim of this scheme is to provide poor people access to bank accounts. However, the account comes with some benefits as well.
India TV brings you seven must-know points about PMJDY:
1. The scheme covers both urban and rural areas of India. All bank accounts will be linked to a debit card which would be issued under the Ru-Pay scheme. Rupay is India’s own unique domestic card network owned by National Payments Corporation of India and has been created as an alternative to Visa and Mastercard.
2. Under this scheme, every individual who opens a bank account becomes eligible to receive an accident insurance cover of up-to Rs 1 Lakh for his entire family.
3. A person who is already having a bank account with any bank need not open a separate account under PMJDY. He/she will just have to get issued a RuPay Card in his existing account to get benefit of accidental insurance. Over-draft facility can be extended in the existing account if it is being operated satisfactorily.
4. Accidental Insurance coverage under PMJDY: Accidental insurance of Rs 1 lakh is available to all RuPay card holders in the age group of 18-70 where RuPay card needs to be used once in 45 days of receipt. Claim intimation should be given to his or her bank where account is maintained within 30 days from the date of accident.
5. Life Insurance coverage under PMJDY. Only one person in the family will be covered and in case of the person having multiple cards/accounts, the benefit will be allowed only under one card i.e. one person per family will get a single cover of Rs 30,000. The claim of Rs 30,000/- is payable to the nominee(s) of account holder who need to submit necessary documents to the Nodal Branch of the concerned Bank. Government employees (serving/retired) and their families, persons filing Income Tax Return/TDS deductees and persons covered under the Aam Adami Bima Yojana, are ineligible for Life insurance under PMJDY.
6. Once the bank account has been active for 6 months and linked to Aadhar card, the person would become eligible for an overdraft of up to Rs 2,500 which would further be enhanced by the bank to Rs 5000 over time.
7. The scheme also provides incentives to business and banking correspondents who serve as link for the last mile between savings account holders and the bank by fixing a minimum monthly remuneration of Rs 5000.
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Tuesday, December 16, 2014
Jan Dhan Yojana Beneficiaries Face ATM Access Shortage; Cap On Transactions Risks SchemeAs more people are brought under the Pradhan Mantri Jan Dhan Yojana (PMJDY)scheme, their ability to access cash through ATMs
remains a conundrum as the deployment of these machines is failing to match the requirement.
Banks and ATM operators worry that low intercharge fee and a cap on the number of free ATM transactions are making the scheme
unviable.
A warning was sounded by the CATMi (Confederation of ATM Industry), an association of companies who deploy ATMs for banks, about the
risk of high dormancy among accounts opened under PMJDY if enough ATMs were not made available to service thenew account holders.
Under the PMJDY, banks have registered 8.83 crore new account holders, issuing 5.85 crore RuPay cards, said BusinessLine.
RuPay is a domestic card scheme facilitating a multilateral system of payments in India, as per RBI's directive.
The newly issued card requires an ecosystem that supports it. New machines see less than 100 transactions a day, against a minimum of 120 required for an ATM operator to break even.
ATM operators and banks point to operating costs involved in keeping a machine running and say that existing interchange fee is not enough
to sustain the business model, affecting their ability to install more ATMs.
The April to June quarter for the year saw ATM deployment grow at a measly 1% to the corresponding quarter a year ago.The total number of ATMs in India stand at 1,67,000 as of June 2014; Point of Sale (PoS) terminals account for 1.08 crore.
ATM unavailability limits Card adoption
Tata Communications Payment Solutions CEO Sanjeev Patel highlighted the tremendous work done in bringing the rural populace under the banking scheme, and added that "not much" had been done to make the card adoption easier.
According to Patel even when card issuance has seen an upswing, the ecosystem necessary to support it is dwindling, with many players
choosing to slow down deployment.
A report by Deloitte and CII makes a case for 20,000 new ATMs to be available in the first phase of Narendra Modi government's financial
inclusion plan; expected to run from August 15, 2014 to August 14, 2015.
Organized Banking Route at risk
Many Indian banks, state-owned and private, have capped the number of free transactions per month. However, a few banks insist that account holders who manage to maintain a good balance would be eligible for a charge waive-off.
Experts express fear that the added cost of transaction on the small value amount could drive people away from the organized banking route, defeating the very purpose of the scheme.
People with less or no balance, are the ones who need financial inclusion more than others; and it is this particular sub-set, inclusive of the urban poor, who will always need less money to withdraw, says Tata's Patel.
ICRA's co-head Financial Sector Ratings, Vibha Batra, pointed to the proliferation ofATMs in dense urban centres, where the number of
transactions per ATM were lower and also per account deposits in rural areas average around Rs. 3,000 to 5,000, and the number of
transactions per ATMs was less and of low value.
The new banks to come up – IDFC and Bandhan Financial Services, could, however, change the financial landscape. The upcoming small
banks will require adequate cash transfer and payment infrastructure mechanism to be in place in the next 2-3 years, creating an alternate
channel of banking services.
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Life insurance cover under Jan Dhan comes with riders
Keen to push through its financial inclusion plan, the government has finalised the life insurance cover to be provided under the Pradhan
Mantri Jan Dhan Yojana. But unlike expectations, the cover has several riders, meaning that not all those who have opened an account under the scheme would be eligible for life insurance.
For starters, the Rs 30,000 life insurance cover would be limited to just one account holder per family. “The person should normally be the head of the family or an earning member of the family and should be in the age group of 18 to 59,” the guidelines state.
While the beneficiary will have to mandatorily exit the life insurance scheme at the age of 60 years, the cover is at present available only for a period of five years till 2019-20, after which it will be reviewed.
In addition, the eligibility criteria state that life insurance would be available only to those people opening a bank account for the first time between August 15, 2014 and January 26, 2015.
Further, the person must have a valid RuPay Card and biometric Card linked to the bank account or in the process of being linked to the
bank account.
The Centre has also excluded various categories of people from the scheme, including Central and state government employees, people whose income is taxable under the Income Tax Act, 1961 or TDS is being deducted from the income, and their families.
“Persons who are included in the Aam Aadmi Bima Yojana covering 48 occupations defined under the Scheme, and their families” have
also been excluded. Further, other eligible account holders who have life cover on account of any other scheme of the Bank against the account will have to choose between the two life covers.
Prime Minister Narendra Modi had launched the scheme on August 28, this year with the intent of financially empowering the people by
opening bank accounts for two persons in every household.Additionally, they are to be given a RuPay debit card, accidental insurance cover of Rs 1 lakh and an overdraft facility.
The government has targeted 7.5 crore households under the scheme. At present, 9.04 crore accounts have been opened with total deposits of Rs 7,006 crore. However, 6.68 crore accounts continue to be dormant. Life Insurance Corporation of India is responsible for the life insurance cover through a special fund for the purpose which has an initial corpus of Rs 100 crore from the Social Security Fund.
Eligibility criteria* Insurance would be available only to those people opening a bank account for the first time between August 15, 2014 and January 26, 2015.
* While the beneficiary will have to mandatorily exit the scheme at the age of 60 years, the cover is at present available only for five years till 2019-20 after which it will be reviewed.
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Moving towards full financial inclusionThe President of India, Shri Pranab Mukherjee inaugurated today (December 11, 2014) a Financial Literacy Centre and a Financial Library at Dr. Rajendra Prasad Sarvodaya Vidyalaya in the Presidents Estate. A Financial Awareness Festival was also held in which students of Dr. Rajendra Prasad Sarvodaya Vidyalaya as well as residents of the Presidents Estate were trained in financial literacy using a model bank
branch of the State Bank of India. NPCI through RuPay Cards gave Rs. 25/- credit to each student to buy books, educating them thereby
about card transactions. Financial games, quizzes and other activities were also organized for students, children and parents.
The Rashtrapati Bhavan launched a campaign for turning the Presidents Estate into a financially inclusive township (FIT) on September 27,
2014.
The campaign included:-
A financial literacy programme.
Enrolling all residents in UIDAIs Aadhar scheme.
Opening of Saving Bank Accounts for the unbanked under the Pradhanmantri Jan Dhan Yojana.
Enrolment of people in Swavalamban, - a special scheme of the Pension Fund Regulatory and Development Authority for those belonging to
the unorganized sector.
Issue of RuPay Cards to new as well as existing account holders of the United Bank of India within the Estate.
To develop a comprehensive strategy, an action plan was developed in association with representatives of United Bank of India, State Bank
of India, National Payment Corporation of India,Pension Fund Regulatory and Development Authority, UIDAI etc. Financial literacy-cum-
inclusion camps for residents of the Estate were organized on September 27-28, 2014 and December 7-9, 2014to enrol residents of the Presidents Estate in various schemes.Special attention was given to senior citizens, women, special children, domestic help and contractual
workers.
Subsequent to the camp held in September 2014, the United Bank of India carried out a comprehensive survey through door-to-door
mapping to ensure that there are no households left without any bank account. Domestic help and contractual workers not covered under
any health scheme were also provided benefits under the Delhi Governments Arogya Yojana.
The pilot project to make Presidents Estate an FIT has been undertaken to establish a model of convergence in government programmes and services and ensure that benefits of various schemes accrue to all residents of the Presidents Estate, who number around 5000 persons.
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Sunday, December 7, 2014
Banking on rural deposits
The Jan Dhan Scheme has by far been the quickest and most expansive financial inclusion drive launched in the country. It was launched
with a set target for the existing banks. The results are quite amazing and actually provide some guidance to the new players entering the market as ‘payments’ or ‘small’ banks.
So far, 81.2 million accounts have been opened of which 60% are in rural areas. Banks, primarily public sector banks (PSBs), have issued
51.1 million RuPay cards for these accounts. Deposits in these accounts were R6,355 crore as of November 26. Interestingly, there were
60.7 million zero-balance accounts, which implies an average of R3,100 in the non-zero accounts. This scheme has been aggressively
implemented and the focus was more on opening accounts with minimum KYC norms to expedite the process. The idea is laudable as it is a
quick way of accomplishing a task. But the high zero-balance accounts, as well as low balances on an average, actually signal that these households typically do not have the money to keep as deposits or are sceptical of the same. Alternatively, they may not really be interested in such deposits, notwithstanding the add-ons of a debit card as well as possible future credit and insurance going forward.
Therefore, RBI’s decision to start issuing licences to payments banks that will take savings bank deposits and invest only in government securities for a 1-year duration or less and, to a certain extent, in other bank deposits, will pose a challenge to the licensees as they will have to create a superstructure to keep their business going. All options are open and telecom companies and other card-based companies can tie their businesses with bank accounts and probably be more successful than banks as there is already an existing business relationship with the customer. The question is will these households actually keep the deposits with these banks or not?
Post offices qualify for such a licence and are well poised to leverage this market. They would only have to scale up and not really have to start afresh like the supermarkets or telecom companies. Their deployment of funds too would change—passing it on to the Centre and states; they will have to deploy all in short-term paper. Their operations too have to be altered unless a new Post Office savings bank is opened in the same premises, as there are other products being offered which can no longer be done—postage, fixed and recurring deposits, and small savings (including the Kisan Vikas Patra). Regulation does not permit the same and, hence, a new bank may be created for this purpose. However, for an completely new entrant, the establishment costs would be considerable.
The model, for any entrepreneur, makes a lot of sense as the bank will get deposits at 4% or free (current accounts) and can earn a good 7-8% return. Operational costs will be low at 1-2%, and hence a return of 1-2% can be maintained without any encumbrance of NPAs or capital as these variables will become irrelevant given the business model. However, if fresh infrastructure is to be created then there would be high overheads.
The small bank concept is, of course, more challenging as 75% of the funds have to go to priority sector lending, to the farm sector and the SMEs, with a cap of R25 lakh for 50% of the loans. This will be on top of the CRR and SLR requirements. Intuitively, it can be seen that the cost of servicing these small-sized loans would be high for these banks which will also have to open up brick-and-mortar branches, unlike the payments banks.
Additionally, both these segments are vulnerable. When the monsoon fails, the farm loans go bad and the cycle of monsoon failures has been moving with shorter amplitudes. Further, the economic cycle too has become more unpredictable and, often, a sustained industrial slowdown results in higher NPAs being generated as they get affected almost immediately when the economy slows down. This being the case, the pressure on quality would be high. This will also pressurise their capital and hence will be onerous, unlike it is for commercial banks where the portfolio is well spread across all sectors, smoothening the risks .
MFIs and NBFCs can apply here and it will be interesting to see if they are attractive to these players. This will hold for MFIs who would get access to deposits in a formal manner and can lend to these segments where there is a modicum of familiarity. NBFCs, too, may be inclined to consider this option given that the regulatory structure has become a little more intense for them in their normal line of business.
The crux of these banks working well would depend on their ability to garner deposits in the rural areas in particular. The Jan Dhan
Yojana warns that it may be difficult to get the deposits, though opening accounts would be easy. It will require a lot of awareness. Counter-
intuitively, if the Jan Dhan programme that offers the promise of credit and insurance has not caught on, would a plain vanilla deposit be
convincing to the household. This is where the payments bank should work and linking one’s own product to the deposit could be a good way of making a start.
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Jan Dhan scheme rush: Banks run short of passbooksBeneficiaries of the Centre-sponsored Jan Dhan scheme are yet to receive their passbooks even after opening accounts two months ago
as banks are facing a severe shortage of booklets.
According to a data provided by Syndicate Bank— the lead bank for the project in Meerut circle—over 1.75 lakh accounts have been opened under this scheme in Meerut. District manager of the lead bank, BD Pandey, said, "About 70% new account holders have been given the passbooks but the accounts are opened in such huge numbers in all the banks that it is not possible to provide passbooks to all the costumers. The crisis is not just in Meerut, but prevails in entire state. All the banks are sending their demands to concerned head offices but it will take some time to fulfil the demand."
The situation in Baghpat district is worst. Here, over 36,000 accounts have been opened under the scheme but only 40% costumers got their passbooks. A number of costumers did not even get their account numbers. A resident of Brahamanputthi village in Baghpat, Sonam, said, "I have been visiting the bank for last two months continuously but neither had I got my account number nor the passbook. Every time bank
officers tell me that account number will be given with the passbook."
Amidst such situations, the residents are worried over the fact that how they would deposit their savings without having a bank account
number and enjoy the benefits of the 'Jan Dhan scheme.'
Pradhan Mantri Jan Dhan Yojana is a scheme for comprehensive financial inclusion launched by Prime Minister, Narendra Modi on 28
August 2014. He had announced this scheme on his first Independence Day speech on 15 August 2014. Under this scheme, account
holders will be provided zero-balance bank account with RuPay debit card, in addition to accidental insurance cover of Rs 1 lakh. Those
who open accounts by January 20, 2015 over and above the 1 lakh accident cover, they will be given life insurance cover of Rs 30,000.
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Sunday, November 16, 2014
Blistering pace: 6.5 crore bank accounts opened so far under Jan Dhan scheme
Banks, especially public sector and regional rural banks, are going all out to open accounts for individuals from low-income segments.
Under the Prime Minister Jan-Dhan Yojana (PMJDY), which was launched on August 28, banks collectively opened a whopping 6.51 crore
basic savings bank deposit accounts (BSBDA) in just two months.
Going by the blistering pace at which banks are opening accounts, in all probability, they will surpass the target of reaching 7.5 crore un-banked families by January 26, 2015.
Of the 6.51 crore new accounts that have been opened so far, 4.95 crore are with zero balance, as per data submitted by banks to the Finance Ministry.
Banks mobilised deposits aggregating 4,857 crore from the remaining 1.56 crore new accounts. What this means is that new customers, on₹ average, deposited 3,113 per account.₹
Public sector banks and regional rural banks accounted for 81 per cent and 16 per cent, respectively, of the total accounts opened
under PMJDY. The response of private sector banks to the Yojana has been lukewarm.
While banks went all out to open the accounts, they could not issue “RuPay” debit cards to almost half of the new customers.
RuPay cards
“With banks aggressively taking up the task of opening accounts under the PMJDY, supply of RuPay cards lagged demand. However,
steps have been taken to augment the supply of cards.
“By December 15, all customers who opened accounts under the PMJDY will receive the cards,” said a senior public sector bank
official. PMJDY is a National Mission for Financial Inclusion. It seeks to ensure access to financial services, namely, banking/savings and
deposit accounts, remittance, credit, insurance and pension in an affordable manner.
RuPay debit card is the home-grown card payment scheme launched by the National Payments Corporation of India to rival global payment
processing giants Visa and MasterCard.
Under PMJDY, the debit cards comes with 1 lakh accident insurance cover, and an additional 30,000 life insurance cover for those ₹ ₹opening bank accounts before January 26, 2015.
The performance of the BSBDA is monitored and overdraft facility of up to 5,000 is given in a phased manner.₹
To remain eligible for the 1 lakh accident insurance cover that comes with the BSBDA, the₹ RuPay cards have to be used at least once in
45 days.
At a recent meeting, Finance Ministry mandarins told top bankers that mere issuance of cards will not suffice.
The cards have to be activated at the earliest and made operational.
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Monday, November 10, 2014
5 crore Jan Dhan accounts outside Rs 1 lakh accident insurance ambit
Five crore of the seven crore bank accounts opened under the government's flagship financial inclusion programme, Pradhan Mantri Jan Dhan Yojana (PMJDY), have fallen outside the ambit of the in-built Rs 1 lakh accident insurance cover as these accounts have seen no transaction since they were opened.
Bankers and insurance industry executives say rules require at least one transaction in the account in the preceding 45 days for an account holder to be eligible for the insurance cover. But of the seven crore accounts opened under the scheme, only 1.71 crore accounts have seen transactions while the rest have had zero balance since they were opened, which means there have been no transactions in these accounts.
PMJDY, which was launched by Prime Minister Narendra Modi on August 28, seeks to cover 7.5 crore un-banked households in the country in the first phase. It provides Rs 5,000 overdraft facility for Aadhar-linked accounts and RuPay debit card, besides a Rs 1 lakh accident insurance cover "If an account holder meets with an accident during the 45 days when there has been no transaction in his account, he is not entitled to the insurance cover," said a senior executive with state-run Vijaya Bank who is involved in implementing PMJDY.
The executive said most of the account holders seem unaware of the '45-day clause'. "We are trying to explain it to them," he said. National Payment Corporation of India (NPCI), which has an agreement with private sector HDFC Ergo to provide this insurance cover, is of the view that the accident insurance should not be looked as a plain vanilla welfare measure. "These are initial days of the scheme and there is no need to get disheartened," said AP Hota, managing director and CEO of NPCI."Most of these accounts will be soon linked with various direct benefit transfer schemes and then there will be regular transactions."
The government is all set to launch a modified direct benefit transfer for liquefied petroleum gas (LPG) on a pilot basis in 54 districts across the country. Under the scheme, LPG consumers will be able to get subsidy directly in their bank accounts even if they do not have Aadhaar numbers.
So far, under PMJDY around 32% accounts have been seeded with Aadhaar and around 4 crore have been issued the Rupay debit card.The prime minister had earlier said that a lot of effort will be required in promoting financial literacy among the new account holders. "New accounts also need to be kept alive and properly utilised.
Aadhaar numbers will need to be seeded in bank accounts," he had said.Towards this end, the finance ministry is working on to increase the reach of banks through various models, including banking correspondents to facilitate banking facilities.
Five crore of the seven crore bank accounts opened under the government's flagship financial inclusion programme, Pradhan Mantri Jan Dhan Yojana (PMJDY), have fallen outside the ambit of the in-built Rs 1 lakh accident insurance cover as these accounts have seen no transaction since they were opened.
Bankers and insurance industry executives say rules require at least one transaction in the account in the preceding 45 days for an account
holder to be eligible for the insurance cover. B ..
Read more at:http://economictimes.indiatimes.com/articleshow/45092865.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
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Jan Dhan balance tops Rs 5,000 crore mark, nearly 7 crore accounts opened
The Pradhan Mantri Jan Dhan Yojana has so far managed to bring over Rs 5,000 crore into the formal banking system, as close to seven
crore account holders have started depositing cash into their bank accounts. A large part of this money was hitherto kept at home, with little or no productive use.
Latest data collated by the finance ministry showed that on November 3, 6.98 crore bank accounts had been opened across the country, with
Rs 5,300 crore parked in them. Just a tad under 4 crore RuPay cards had been issued to these account holders, with the remaining
expected to get the ATM card over the next few weeks, officials said.
At the current pace, it's a matter of days before bank employees help the government scale the target of opening 7.5 crore bank accounts under the financial inclusion scheme launched on August 29. The government was looking to achieve the target before January 26, 2015, well ahead of the earlier schedule of August 15, 2015. But with the target within reach, the finance ministry is now looking at doubling the target to open 15 crore accounts, said an official.
While banks have been ahead of the curve in opening bank accounts, the run rate for deposit accumulation has started picking up now. At
current levels, each Jan Dhan account has a balance of around Rs 750. Initially, the average balance in each account was around Rs 500.
Historically financial inclusion accounts have been low value accounts for public sector banks with balances of less than Rs 1,000. For banks, experts said, the challenge is to ensure that the accounts remain active and account holders keep depositing funds as low account balance have in the past deterred bankers from pushing financial inclusion.
This time, however, the government is hoping that cash transfer into the accounts will ensure that transactions take place and sufficient
balance is maintained. With the finance ministry also proposing overdraft facility based on the financial history of an account holders, there is an added attraction to maintain a healthy balance.
A recent report by Boston Consulting Group, Ficci and the Indian Banks' Association had pointed out that among the 16 crore no-frills accounts opened before Jan Dhan's launch, only a quarter had a single transaction last year. Similarly, a quarter actually had a balance. "In effect, five years of effort has led to about 20% addition to active savings bank accounts in the nation," said the report, released in September.
Chandra Shekhar Ghosh, CMD of micro finance institution Bandhan Financial Services, which recently got RBI permission to set up a bank
network, told TOI on Tuesday that the challenge for banks is to deliver services at the doorstep. "The Jan Dhan Yojana is a very good
initiative to open the accounts but how banks design the products and services and bring it to the doorstep that is the issue. You need to inculcate the habit of banking with those customers," he said.
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Three-fourths of Jan-Dhan accounts hold zero depositsEven as banks race to open up accounts under the Pradhan Mantri Jan-Dhan Yojana, only a quarter of the accounts opened till date have any cash deposited in them.
Official data reveals that of the 6.99 crore bank accounts opened till November 4, 75 per cent or 5.29 crore accounts have zero balance. The data also reveals that it is two non-BJP states — Uttar Pradesh and West Bengal — where the maximum number of bank accounts have been opened under the scheme.
However, 1.69 crore accounts under the scheme have managed to bring in Rs 5,294.10 crore of household savings into the formal banking channels. Back of the envelope calculations show that on an average each of the accounts have deposited Rs 3,100.
Officials, however, argue that opening of bank accounts is more important and savings will pick up gradually. “A bank account will help inculcate the habit of saving,” said an official. The Jan-Dhan Yojana was launched by Prime Minister Narendra Modi on August 28 with the goal of eradicating “financial untouchability” of the poor by opening at least one bank account for every family in the country in less than six months.
At the time banks had been given a target of opening 7.5 crore accounts under the scheme. Each of the accounts come with a debit card, Rs 1 lakh accidental insurance policy and Rs 30,000 free medical insurance cover for those who enroll before January 26. Depending on the performance of the accounts in the first six months, banks will later extend a Rs 5,000 overdraft facility to one account per household.
While Samajwadi Party led-Uttar Pradesh has opened 1.16 crore bank accounts under the scheme, Trinamool Congress-governed West Bengal has opened 49.54 lakh bank accounts. BJP-led Rajasthan and Madhya Pradesh have opened 46.3 lakh and 45.82 lakh accounts, respectively, under the scheme till October 29, 2014. The finance ministry, which has been keeping an eye on the progress of the scheme is hopeful that it will meet the target for account opening this fiscal. The data reveals that of the 6.99 crore accounts opened, 3.69 crore RuPay debit cards have also been issued while 2.15 crore accounts have been seeded with Aadhaar numbers.
However, experts say that for the scheme to be truly successful, banks need to provide doorstep services. “Bankers need to understand that if they want to really do financial inclusion, accounts have to be active… they need to provide doorstep banking along with overdraft facility from day one so that the holder can easily access the services,” said Chetna Vijay Sinha, chairperson, Mann Deshi Bank Organisation that runs a regulated cooperative bank for women.
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Friday, October 31, 2014
Get account holders under Jan Dhan to use RuPay card, FinMin tells banks
To get customers opening accounts under the Pradhan Mantri Jan Dhan Yojana to use their RuPay debit cards, the Finance Ministry is believed to have asked banks to take a carrot-and-stick approach.
So, to remain eligible for the 1 lakh accident insurance cover that comes with the Basic Savings Bank Deposit Account (BSBDA), the cards ₹may have to be used at least once in 45 days.
At a recent meeting, Finance Ministry mandarins told top bankers that mere issuance of cards will not suffice. The cards have to be activated at the earliest and made operational.
Ministry officials said that customers have to be advised to operate the cards at a certain time interval, say, once in 45 days, in order to continue to enjoy the accident insurance cover without any charge to them.
Banks were also advised to have an “SMS” alert system for BSBDA beneficiaries so that they use the RuPay card once in 45 days and remain eligible for the accident insurance cover, said a senior official of the Union Bank of India.
RuPay is the home-grown card payment scheme launched by the National Payments Corporation of India (NPCI) to rival global payment processing giants Visa and MasterCard.
It has been conceived to offer a domestic, open-loop, multilateral system which will allow all Indian banks and financial institutions to participate in electronic payments.
This card is accepted at all ATMs (for cash withdrawal) and at most of the PoS machines (for making cashless payment for purchases) in the country.
A ‘Basic Savings Bank Deposit Account’ or ‘no-frills’ account does not have any minimum balance requirement. The services available for such accountholders include deposit and withdrawal of cash at bank branches as well as ATMs; receipt/credit of money through electronic payment channels or by means of deposit/collection of cheques drawn by Central/State Government agencies and departments.
While there is no limit to the number of deposits that can be made in a month, accountholders will be allowed a maximum of four withdrawals in a month, including ATM withdrawals; and comes with the facility of ATM card or ATM-cum-debit card.
The Pradhan Mantri Jan Dhan Yojana (PMJDY), which was launched on August 28 by Prime Minister Narendra Modi, is a National Mission for Financial Inclusion.
Financial inclusion is the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low-income groups at affordable cost
The Yojana seeks to ensure access to financial services — namely, banking/savings and deposit accounts, remittance, credit, insurance and pension — in an affordable manner.
Banks have been set a collective first target of reaching 7.5 crore unbanked families under the PMJDY by January 26, 2015.
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Sunday, October 26, 2014
We expect credit growth to pick up by end of third quarter: Bank of India MD Vijayalakshmi Iyer
Bank of India is planning to set up a subsidiary dedicated to social work, a first among its domestic peers. Amid increasing competition, the public sector lender is trying to consolidate the credit portfolio, cut expenses and focus on fee and treasury income to stay profitable. The bank is focusing on bringing down stressed assets by strict monitoring and faster resolution of cases. Vijayalakshmi Iyer, chairperson & managing director, tells Manju AB how she is steering the bank out of its bad debt problem by personally attending to large accounts. Excerpts from the interview:
What is driving business at Bank of India? With credit growth being at a decade low, how will banks beat the trend and still stay profitable?The growth has been very low in tune with the industry trend post March 2014. This actually provided an opportunity to consolidate credit portfolio and to put more resources for monitoring mechanism. These efforts will result in lower credit cost and will improve profitability. With more focus on timely resolution of stressed assets, the profitability will, in fact, improve.
When do you expect corporate credit to pick up? And which sectors do you see reviving faster than others?There has been slowdown in corporate credit demand. Many steps are being taken by the government to enable economic growth to assume faster pace. With pro-growth environment being created, we expect credit growth to pick up by the end of third quarter of the current fiscal. We expect pick-up in SME sector to lead.
How is the retail credit growth?Notwithstanding lower corporate demand for credit, the retail sector continues to grow resulting in better balancing of portfolio. Focus on agriculture, retail and MSME is driving the business. Widespread geographical spread of branches is helping us growing in these sectors. During the first half of this fiscal, schematic retail loan has grown 12.21% from Rs 21,982 crore as on March 31, to Rs 24,665 crore as on September 30. The growth is 28 % year on year (Rs 19,284 crore to Rs 24,665 crore). Home loan growth has been 31% on a year-on-year
basis (Rs 11,400 crore to Rs 14,913 crore). Home loan and LAP constitutes 74% of schematic retail loans as on September 30, 2014 (home loan Rs 14,913 & LAP Rs 3,424 crore). Total retail loans (personal loan segment) of the bank stood at Rs 29,654 crore as on September 30, 2014. Considering the growth pattern in the earlier years, we expect about 40% growth in retail loans during 2014-15.
What will be the key driver of your profits during the current quarter?The deposit rates have softened in the absence of demand for credit. This will help in achieving lower cost of fund and better "NIM' (net interest margin). Initiatives have been taken to curtail operational expenses as well as to increase non-interest income. All out efforts are being made to achieve lower credit cost by improving monitoring process and also by achieving speedier resolution of non-performing assets. There are two major sources of fee income, in addition to general banking services including remittances, etc. That is (1) business related to credit portfolio and (2) fixed income portfolio. Given the softening of yields on fixed rate bonds, we do expect gains on that account to contribute to our profits.
How are your deposits growing? Any specific campaigns to mobilise CASA (current account savings account)?It is desirable to match growth in deposits to growth in credit business. Given that demand for credit has been muted, the deposit portfolio is registering slower growth in keeping with opportunities for deployment. We are placing thrust on CASA business and special drives are being arranged across the country to expand the customer base further. Technology related initiatives are being implemented to make banking more customer friendly. The government business is also being expanded with a view to increase CASA portfolio.
How is the joint lending forum (JLF) helping the bank combat the rise in bad loans? Is the JLF being implemented in all earnestness with co-operation from all banks?Joint Lending Forum (JLF) has been helping the banking system in early resolution of stressed accounts as RBI guidelines warrants time bound rectification process by all banks if majority of banks (75% in value and 60% in numbers) agree for any of the three options available, that is rectification, restructuring or recovery. The implementation of corrective action plan under JLF route has almost stabilised barring addressing of few issues like short period available for implementation of restructuring under CDRon-CDR route.
Asset reconstruction companies (ARCs) say banks need to give bigger discounts for sales to happen. What has been your experience?In fact, the role of ARCs is very important in faster resolution of stressed assets. We feel that ARCs need more capitalisation to meet the revised norms of payment of cash up-front of 15%. Admittedly, with higher cash up-front, the ARCs will have more commitment, which will lead to even faster resolution. Bigger discounts on sales will force banks to have bigger hit to their P&L.
Now social media networks like Facebook and Twitter are attempting at money transfers, printing cheque books, etc. Is there any threat to traditional banking from these alternate channels?There is no question of threat. Innovations in technology are always welcome as they help in achieving higher level of efficiency in providing banking services. It is desirable to remain aligned with evolving technology. We have focus on IT enabled services to ensure that our customers have access to state-of-the-art technology. We were the first PSU bank to introduce first ATM long back in the country. Recently, we introduced cash remittance through ATM to non customers without use of ATM card. It has received good response. Most of our ATMs are now enabled to provide this service of Instant Money Transfer (IMT).
Banks are planning to sell off their non-core assets to streamline the organisation What would be your non-core assets that you might put on the block?We do have strategic investments and keep reviewing the same from time to time. It is always desirable to realise gains on such investments to augment capital. It is a continuous process.
You had plans of setting up a wholly owned subsidiary for corporate social responsibility. What has been the progress of that?With a view to have consistent approach for achieving our corporate social responsibility objectives, we have proposed formation of a trust. We have approached appropriate authorities for approvals. We are expecting approvals soon.
Will you have to raise money for Basel III compliance? Will you give some details on the fundraising plans of the bank?We need to strengthen our capital structure to ensure consistent growth while maintain the desirable levels of capital adequacy. This is a continuous process. We are observing capital market developments very closely and have plans to raise capital at an appropriate time.
Finally, how is Jan Dhan scheme faring and how much of deposits in these accounts if at all have you collected?Our bank has opened 28.82 lakh accounts from August 16 to October 16 under Jan Dhan scheme and collected Rs 70.07 crore deposits. The scheme is in full swing by means of carrying out household surveys in all the allotted Sub Service Areas (SSA) and wards which is expected to be completed by October 31.Number of RuPay Cards issued by our Bank so far is 17.94 lakh. The backlog is expected to be cleared by November 15. Aadhaar seeding and opening of accounts through e-KYC is picking up and we have seeded 23.48 lakh accounts and opened 11,716 accounts through e-KYC so far.
Have you also rolled out Swachh Bharat campaign?In this national endeavour, BOI has committed Rs 4 crore for construction of toilets in government schools. The project will cover 85 girls secondary schools in Jharkhand. List of schools and districts covered in the state has already been conveyed to finance ministry, and ministry of HRD. Implementation will be done through local agencies in coordination with BOI zonal offices situated in Jharkhand.
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August 28, 2014
TPDDL organises camps for opening of bank accounts under Pradhanmantri Jan Dhan Yojana
Four day long initiative (August 25-28) launched in association with Axis Bank, PNB and HDFC Bank Initiative targeted JJ Clusters residents without bank accounts in North and North–West Delhi More than 2223 bank accounts opened during the four day period
TPDDL organises camps for opening of bank accounts under Pradhanmantri Jan Dhan Yojana
New Delhi: With a view that an extension of banking services is a must for the economic development of the country, Tata Power
Delhi Distribution (TPDDL) has extended support to the Prime Minister’srecently announced Pradhanmantri Jan Dhan Yojana. The
scheme aims at financial inclusion of people left out from the mainstream of the financial system and promotes a minimum of two
bank accounts per family.
Presently, a major chunk of the Indian population does not have a bank account. TPDDL is of the view that the lack of financial
inclusion means that a significant amount of household savings stays away from the banking channel, not only harming individuals, but
also adversely affecting the country’s economy. With an extension of banking services to even the last person in the queue, all would be
able to keep their money safe and earn interest on the savings and at the same time the larger availability of funds with the banks would
imply lower interest rate which is critical for the economic growth of the country.
To achieve the goal, TPDDL joined hands with leading banks – Axis Bank, PNB and HDFC Bank. Together with the banks, TPDDL
organized 19 camps in JJ Clusters of North and North West Delhi from August 25 to 28, 2014, and facilitated the opening of accounts for
2223 consumers in the leading banks.
The areas covered under the initiative were BG Block, Shalimar Bagh; Wazirpur Industrial Area, Bagkare Khan, near Vivekanand Puri
and Sarai Rohilla, Indra JJ Colony, Rohini Sec-3, Furniture Block, Kirti Nagar, Shakurpur, near HP Petrol Pump, Netaji Subhash Place,
Haiderpur Village; Farishta Soap Shahazada Bagh; B & C Block, Ambedkar Bhawan, Wazirpur; Kathputli Colony, Sawana Park, GP
Block Pitampura; JJ Colony, Bawana, Metro Vihar, Phase 2; Om Nagar and Dhobi Ghat, Jawahar Camp, Kala Pahar, Daya Basti/Sarai
Basti, Shaktinagar, etc.
For opening of bank accounts, the electricity bills of TPDDL were accepted as a valid address proof. All banks accounts opened under
the scheme were zero balance accounts and provide facilities like debit card, cheque book and an accidental insurance to the tune of Rs
1 lakh per family.
Commenting on the initiative, Mr. Praveer Sinha, CEO and ED, TPDDL, said, "We, as an integral part of the Tata Group have always
supported the Government in its landmark initiatives. Pradhanmantri Jan Dhan Yojana is an ambitious programme which aims to extend
banking services to all the citizens of the country and we are going to extend all our support to the initiative as it is critical to include
every family in the financial domain for the economic growth of the country. I thank, Axis Bank, PNB and HDFC Bank for partnering
with us."
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Business & FinanceUSIBC Welcomes Finance Minister Arun Jaitley’s First Full-Year Union Budget as a Bold Roadmap for Improving the Ease of Doing Business in India
Category: Business & Finance
Published: Wednesday, 04 March 2015 01:22
The U.S.-India Business Council (USIBC) welcomes Finance Minister Arun Jaitley’s Union Budget as a bold roadmap
for improving the ease of doing business in India. The Council strongly supports many reforms announced in the
budget targeted to encourage infrastructure development, modernize capital markets, reduce tax uncertainty, and
spur domestic economic growth. “We applaud Finance Minister Jaitley for today's ambitious reform agenda and
welcome concrete policies that demonstrate the Government of India's commitment to a new era of growth,”
said Dr. Mukesh Aghi, President of USIBC. “U.S. companies stand ready to partner with the Government of
India on priority initiatives including Smart Cities, Make in India, Jan Dhan Yojana National Financial Inclusion
Mission, Clean India, and Digital India. This Budget provides us positive steps forward in strengthening this
partnership." USIBC supports the commitment by the Government of India to expeditiously implement a Goods and
Services Tax (GST) regime by April 2016. Once implemented, the GST will dramatically increase government
revenue while streamlining operational and cost planning for businesses and could increase India’s GDP growth rate
by 1-2% by establishing a “free-trade zone” within its own borders. A delay in implementation of the General Anti-
Avoidance Rules (GAAR) is a welcome move which will allow time for critical business planning. Reduction in the
corporate tax rate and a more clear direct tax regime - both key announcements of this budget - will rejuvenate the
investment outlook and increase predictability. Furthermore, USIBC applauds the Finance Minister's focus on
infrastructure, including rejuvenation of public-private partnerships, the announcement of a National Infrastructure
Investment Fund to provide public capital in support of increased private investment in infrastructure, and steps
toward bankruptcy reform which will unlock liquidity in stalled projects. USIBC will continue to provide support in
expediting the transformation of Ajmer, Allahabad, and Vizag into smart cities with American technology, capital,
and expertise in the months and years ahead. Moreover, the industry body commends the Government of India on
allowing foreign investment in Alternate Investment Funds as well as important steps toward developing a more
robust pension system providing financial stability for all Indians. USIBC supports Finance Minister Jaitley's assertion
that a "quantum jump" forward is the change needed to kickstart India's next era of growth. Formed in 1975 at the
request of the U.S. and Indian governments, the U.S.-India Business Council (USIBC) is the premier business
advocacy organization advancing U.S.-India commercial ties. Today, USIBC is the largest bilateral trade association
in the United States, with liaison presence in New York, Silicon Valley, and New Delhi, comprised of 325 of the top-
tier U.S. and Indian companies.
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You are here:Home Banking & Financial Services
PM Modi Congratulates Bankers on Success of 'Jan Dhan Yojana'NDTV | Updated On: January 24, 2015 15:23 (IST)
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Prime Minister Narendra Modi on Saturday sent an email to bankers, congratulating them on the success of the
'Pradhan Mantri Jan Dhan Yojana. '
"It gives me great pleasure to have seen the exceptional work done by you all in ensuring the success of the Pradhan
Mantri Jan Dhan Yojana," the Prime Minister wrote.
Announced by the Prime Minister during his Independence Day speech, the scheme is a national mission to bring
every household under the financial radar.
The scheme was launched on August 28, 2014, with a target of covering 7.5 crore households till January 26.
"The target set for opening bank accounts for all households has been surpassed well ahead of the target. By
opening 11.5 crore new accounts in a very short span, we have achieved a coverage of 99.74 per cent of all
households in the country. I congratulate you for your extraordinary efforts," the mail said.
However, the Prime Minister also asked bankers speed up this process and redouble efforts on financial literacy and
said that all 'Jan Dhan' bank accounts should be linked to 'Aadhaar'.
"We need to redouble efforts on financial literacy. Aadhaar seeding needs to improve further. Bank Mitras need to be
enabled to carry out RuPay card and Aadhaar enabled transactions in villages itself," he told the bankers.
"I want you to work to ensure that each account holder enrolls for Aadhaar and seeds it in the bank account. This
needs to be done for all accounts. I am sure you will do this seeding with the same zeal you showed in driving bank
account opening," he added.
Noting that "well begun is half done", PM Modi laid out a roadmap for the future as he said the 'Jan Dhan Yojana'
provides a platform for changing the economic condition of the people.
"We need to build on this success and leverage these accounts to provide our citizens a wide range of credit,
insurance and pension services. We also need to maintain high standards of customer service. This is the next phase
of Pradhan Mantri Jan Dhan Yojana," he said.
Underlining that most development activities are hindered by the single disability of not having bank accounts, he
said, "We have now overcome this disability. Benefits have already started flowing to people through some of the
Direct Benefit Transfer schemes. This not only ensures that benefits reach people directly, but also utilises your
accounts well."
In words of encouragement to the bankers, he said, "You will recall that when we started this mission, many had
doubts about our ability to achieve this task in a limited time span of five months.
"However, you have proved sceptics wrong and achieved what appeared impossible. This feat alone should motivate
you, as well as others to work to make our dreams a reality."
He said this was their great contribution to nation- building and thanked them for being a part of this huge national
mission through which "we shall be able to help every citizen of India achieve a better quality of life."
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Pradhanmantri Jan-Dhan YojanaBank accounts of over 14 lakh unorganized labourers to be openedPublished by cg-04.com on Mon, 09/08/2014 - 13:05
Saving accounts of more than 14 lakh labourers of unorganized sector will be opened in various banks under Pradhan Mantri Jan-Dhan Yojana. Various departments of the state government will work with mutual coordination for identification and rehabilitation of child labourers and to provide them education facilities. Grade-III Field-level Officers of all the development-related departments will be given powers of Labour Inspector for identification of child labourers.
Source:
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Pradhan Mantri Jan-Dhan Yojana will prove to be a milestone: Shri Vishnudev SaiPublished by cg-04.com on Fri, 08/29/2014 - 12:21
Union Minister of State for Minerals, Steel and Labour Shri Vishnudev Sai today inaugurated the Pradhan Mantri Jan-Dhan Yojana in a function organized at new circuit house in capital city Raipur. In his address to the function, Minister Sai said that the scheme announced by Shri Narendra Modi is a beneficial scheme for crores of poor people in the country. Pradhan Mantri Jan-Dhan scheme
will prove to be a milestone of socio-economic development for poor families ofthe cities and villages, which lack proper banking facilities.
Source:
Raipur
Sunday 14th of September 2014 10:55:22 AM GMT
Intel making tablet solutions for Jan Dhan Yojana
California-based chipmaker Intel is working in India on certain solutions centred around tablets that would offer a new set of functionality and ease of basic banking at doorstep, which in turn could facilitate the Pradhan Mantri Jan Dhan Yojana (PMJDY) that aims at financial inclusion.
"We have Intel Architecture-based solutions centred around tablets that offer a new set of functionality and ease of basic banking at doorstep. By empowering the business correspondents with tablets it helps to increase productivity and ease of use for them," Srinivas Tadigadapa, director, enterprise solution sales, Intel South Asia, told IANS in an interview.
Currently in urban areas tab banking has caught on. "Taking tab banking to the rural areas allows for a bigger and easier financial
At present a few public as well as private sector banks are trying to implement the IA-based solutions in India.
"Currently we are working with ISVs (independent software vendors) and have already rolled out solutions for financial inclusion which includes tightened security features that runs on IA," Tadigadapa said.
The PMJDY scheme was flagged off Aug 28 by Prime Minister Narendra Modi. Till Sep 8, 30.2 million accounts have been opened of which 18.9 million are in rural areas and 11. 3 million in urban areas. Banks have collected deposits of Rs.1,496.51 crore under the scheme so far, says a finance ministry statement.
Talking about technology consumption in India, Tadigadapa said: "It's growing in double digits, 20 percent or so in overall devices."
" A lot of consumption is happening. Overall in India it is growing much faster in the hinterland. In South Asia each country has its own pattern and no country has the size that India has, in terms of diversity," he added.
He said devices penetration will provide the necessary impetus to digital literacy drive in the country. "It's increasing rapidly and that
With the aim to turn the country into a digitally empowered society and knowledge economy, the government has envisaged Rs.1
"There will be a lot of first time users in the rural India who have not seen technology but now they can see the benefits of
Intel along with The National Association of Software and Services Companies (NASSCOM) had launched the National Digital Literacy Mission (NDLM) in August 2012 bringing together several players from the ecosystem on the same platform to work towards a common goal of accelerating digital literacy in India.
"We have trained two million people in two years in digital literacy and a majority are in the rural areas," Tadigadapa said.
Regarding the purchasing capacity of devices by the people in the hinterland, he said: "Affordability is not much of an issue. Devices are available at various prices. Tablets at around $100 are also available in India."
"India will be one of the top three markets in terms of devices very soon due to sheer amount of population. India is among the top
Though India has excelled in software services, presence of hardware manufacturing is zilch in the country. "We strongly feel that environment has to be created. We do strongly believe in a robust domestic ecosystem for the hardware including the manufacturing.
Related
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Tags: bank accounts for poor, financial inclusion, Jan Dhan Yojana, Modi independence day speech
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RBI says overdraft under Jan-Dhan is priority sector lending
25 Feb 2015, 18:55Jagran Post News Desk Jagran Post Editorial | Last Updated: 25 Feb 2015, 19:28
Mumbai: Giving a big boost to Pradhan Mantri Jan-Dhan Yojana (PMJDY), the RBI on Wednesday said bank
overdrafts of up to Rs 5,000 in accounts opened under this financial inclusion mission will be treated as
priority sector lending.
Representational picture
"...overdrafts extended by banks up to Rs 5,000 in PMJDY accounts will be eligible for lassification under
priority sector advances ('others' category) as also weaker sections, provided the borrowers household
annual income does not exceed Rs 60,000 for rural areas and Rs 1,20,000 for non-rural
areas," the Reserve Bank of India (RBI said in a notification).
Under PMJDY, the overdraft facility is permitted to Aadhaar-enabled accounts after "satisfactory operation" of
accounts for six months.
Last August, Prime Minister Narendra Modi had launched the scheme to provide all households across the
country access to banking facilities.
As on January 31, more than 12.54 crore accounts were opened the scheme. Under priority sector lending,
RBI ask banks to provide a specified portion of loans to few specific sectors.
Priority sector refers to those sectors of the economy which may not get timely and adequate credit in the
absence of the special dispensation.
As per the RBI, these are small value loans to farmers for agriculture and allied activities, micro and small
enterprises, poor people for housing, students for education and other low income groups and weaker
sections.
Jan Dhan needs financial literacy for success: ASSOCHAM
Alka Sirohi
03 October, 2014
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Jan Dhan scheme of opening banking accounts for all households also needs to be backed up with training of account holders to enable them to
benefit from the overdraft of Rs 5,000 to each account envisaged in the scheme, a panel of banking experts has suggested.
There should also be a parallel training of banking staff posted for Jan Dhan accounts handling and reorientation of their attitudes to account
holders from the low income groups.
"Instead of treating them as a mere number among many such numbered accounts, the banking staff should develop relationship with them to
guide them to use the accounts for setting up micro enterprises. Their orientation has to change," said former Chairman and Managing Director
of Punjaband Sindh Bank, K.S. Bains IAS.
In Focus
Bains was participating in the panel discussion that was part of the ASSOCHAM 10th Annual Banking Summit here on Tuesday. Other
participants included Indian Oversees Bank's former CMD Narendra who moderated the proceedings, associate director of E&Y Rajendra Rele,
senior vice-president and head of corporate affairs of SREI Raman Aggarwal and senior director off CRISIL Risk Solutions Manish Jaiswal.
"Think of the Jan-Dhan accounts as Priority Banking and orient your relationship with them," said Bains who had driven such lending to low
income groups advised the audience from the banking industry.
He quoted his experience at Punjab and Sindh Bank when a lady from the rural area asked for a loan to start a beauty parlour in her area and
justified her claim by pointing out how the cultural change in rural areas was creating clients for beauty treatments. After the loan was sanctioned
on his intervention, the business flourished as clients who had earlier.
The former banker also suggested special bank branches for promoting micro enterprises in urban slums and reorientation of account holders
from such urban slums as well as from the rural areas. Most of the account holders would not know what to do with the banking facility and the
overdraft of Rs 5000 should be encouraged for specific micro enterprises. Government and banking industry must fund such reorientation.
For the success of the Jan-Dhan Yojana, banks must lay down to their staff that "unless you are posted there, you will not be promoted," said
Bains insisted.
The banks that were pushing for getting low income households to open banking accounts under Jan-Dhan Yojana could fruitfully utilize the
large number of non-banking financial companies (NBFCs) that have considerable experience in lending to small and medium enterprises, for
making these accounts active all the time. Otherwise there was danger of as much as 70 per cent of the accounts lapsing into inactivity after
opening, Raman Aggarwal pointed out.
Pointing out that banks were already in the mood for serving rural areas, Mr. Narendra who is also the chairman of ASSOCHAM National
Council for Banking and Finance, revealed that last year 7,000 branches were opened in rural areas. Mobile banking was also catching up in these
areas.
The presence of differentiated banking like small banks and pay banks as well as the banking correspondents would be a parallel vehicle for the
inclusion of unreached areas and households. He suggested the overdraft of Rs 5000 per account under the Jan-Dhan Yojana to be used as "seed
money" for orienting account holders for going for micro enterprises.
Financial inclusion should be integrated with skill development, make in India, and other entrepreneurial activity and should be treated as
opportunity for participation in economic development, according to Rajendra Rele (E&Y).
Participants in Jan Dhan Yojana should be made to understand it as a means to grow more money for them, according to Mamish Jaiswal
(CRISIL). He pointed out how collateral free, movable finance was just nine per cent of financing in India while it was as high as 60 per cent in
China and 32 per cent inMalaysia.
That revealed the vast opportunity in this area and the new scheme should be utilized to raise the ratio of this type of lending. Among others he
also suggested creating of a collateral management company to speed up lending to potential small and micro enterprises.
Market Commentary Wednesday, January 21, 2015 14:17 Hrs IST
in Q3 December 2014 over Q3 December 2013. Segment wise results showed that sales of the cigarette division rose 0.62% to Rs 4141.94 crore in Q3 December 2014 over Q3 December 2013. Sales of the FMCG business jumped 11.37% to Rs 2314.12 crore in Q3 December 2014 over Q3 December 2013. ITC announced the third quarter results during market hours today, 21 January 2015.
ITC's non-operational income jumped 48.82% to Rs 581.99 crore in Q3 December 2014 over Q3 December 2013. ITC's operating profit rose 5.47% to Rs 3464.20 crore in Q3 December 2014 over Q3 December 2013. Operating profit margin (OPM) edged up to 38.73% in Q3 December 2014, from 37.63% in Q3 December 2013.
Sugar stocks were in demand. Oudh Sugar Mills (up 5.44%), Rana Sugars (up 2.95%), Shree Renuka Sugar (up 2.22%), Bajaj Hindusthan (up 2.11%), KCP Sugar & Industries (up 1.50%), Dhampur Sugar (up 1.50%), Simbhaoli Sugars (up 0.98%), Sakthi Sugars (up 0.90%), Dwarikesh Sugar (up 0.82%), Balrampur Chini Mills (up 0.65%), Triveni Engineering Industries (up 0.41%) and EID Parry (India) (up 0.11%), edged higher.
In the foreign exchange market, the rupee edged higher against the dollar on optimism demand for local assets will increase as plunging oil prices improve India's economic outlook. The partially convertible rupee was hovering at 61.6175, compared with its close of 61.70 during the previous trading session.
Brent crude futures edged higher amid signs that prices are receiving support around current levels. Brent for March settlement was up 51 cents at $48.50 a barrel. The contract declined 85 cents, or 1.74%, to settle at $47.99 a barrel during the previous trading session.
Finance Minister Arun Jaitley yesterday, 20 January 2015, said that the success of the Pradhan Mantri Jan Dhan Yojana (PMJDY) is a game changer for the economy as it has provided the platform for direct benefits transfer (DBT) which, in turn, will help in plugging leakages in subsidies and thereby provide savings to the exchequer. As against the original target of opening bank accounts for 7.5 crore uncovered households in the country by 26 January 2015, banks have already opened 11.50 crore accounts as on date 17 January 2015 under PMJDY after conducting survey of 21.02 crore households in the country. Jaitley further said that so far 19 schemes out of 35 DBT schemes have been rolled-out across the country, including MGNREGS in 300 districts. The Finance Minister said
that the state governments have also been requested to transfer cash/benefits directly in the bank accounts of beneficiaries thereby cutting layers in the delivery process.
Meanwhile, the Ministry of Commerce & Industry today, 21 January 2015, said that Vietnam's Deputy Prime Minister Hoang Trung Hai while meeting an Indian delegation to Vietnam led by Rajeev Kher, Secretary, Ministry of Commerce, Government of India, has expressed his pleasure at the blossoming of trade and economic relations and his confidence that India and Vietnam would be able to achieve the target of bilateral trade of $15 billion by 2020. He noted that there is great potential for trade and investment cooperation in textiles, agriculture, pharmaceuticals, leather, energy and oil and gas, and invited Indian companies to invest in Vietnam.
European stocks reversed their initial gains today, 21 January 2015. Key benchmark indices in France and Germany were off 0.05% to 0.26%. In UK, the FTSE 100 index was up 0.65%.
The governing council of the European Central Bank (ECB) is scheduled to undertake monetary policy review tomorrow, 22 January 2015. The ECB may announce a large-scale bond-buying program tomorrow, 22 January 2015, aimed at spurring Europe's ailing economy.
Meanwhile, uncertainties over the status of Greece including its possible exit from the eurozone are likely to persist until the early election in the country on 25 January 2015. Greece is set to hold snap elections on 25 January 2015 after it failed to elect a new president in a third round of voting late last year. The Greek leftist opposition party Syriza leads opinion polls ahead of national elections on 25 January 2015. Syriza has demanded debt relief from the eurozone and promised to roll back the austerity and reform measures that the country has undertaken in exchange for the international bailout that the government negotiated in 2012.
Chinese shares led gains in Asian stocks today, 21 January 2015. Key benchmark indices in Indonesia, South Korea, Singapore and Taiwan were up 0.15% to 0.95%. Japan's Nikkei Average fell 0.49%.
Mainland China's benchmark Shanghai Composite Index shot up 4.7%, marking its biggest daily percentage increase since October 2009, extending gains after 1.8% advance yesterday, 20 January 2015. The advance in mainland Chinese markets also boosted Hong Kong stocks, with the Hang Seng Index closing up 1.7%.
China yesterday, 20 January 2015, reported a higher-than-expected economic growth for December.
In Japan, the Bank of Japan (BoJ) today, 21 January 2015, cut its near-term inflation outlook and left its key easing policy unchanged, citing brighter economic growth that could eventually help put prices back on a firm upward path. The BoJ sharply raised its view on growth adjusted for inflation, expecting gross domestic product to rise 2.1% in fiscal 2015 and 1.6% the following year. But it cut its forecast for the year ending in March to a 0.5% contraction from the previous 0.5% expansion.
Trading in US index futures indicated that the Dow could fall 40 points at the opening bell today, 21 January 2015. US stocks eked out small gains after high intraday volatility yesterday, 20 January 2015. In economic news, a gauge of confidence among home builders ticked down this month by one point to 57, staying close to the highest level since late 2005, according to National Association of Home Builders/Wells Fargo data. Readings above 50 signal that builders, generally, are optimistic about sales trends.
Analysis
You are here:orfonline.org » Publications » Analysis
Financial inclusion is the key
Samir Saran
16 January 2015
For the last two decades India has not only accepted but actually revelled in being
labelled an "emerging market". India felt pleased and privileged by this tag, which
seemed to signify that it had somehow 'arrived'.
Strangely enough, the country's sense of pride came not from being an industrial
Search
powerhouse, financial centre, or innovation capital. It was perversely derived from being seen as a 'market'.
The problem is that markets fluctuate and can be a haven for merely temporary investments. As just a 'market',
India was consigned to remain the chosen destination for everything the rest of the world produced in excess.
Therein lay a deep disconnect — consumption can only go hand in hand with production. Surely India could not
have hoped to emerge as a global power on the back of being a mere market, one that ran a trade deficit with
over 100 countries!
Aspirations
Clearly, India's self-image needed a re-boot. This rebooting of India's 1.3 billion aspirations was conducted by
the Prime Minister on the 15th of August last year. He did it with characteristic simplicity, by a simple call for
"Make in India". A call he hoped, would catalyse a seismic shift in India's image of itself.
The world has changed since the Financial Crisis. Economic growth cannot be taken for granted. According to
the IMF, global growth will continue to be under four per cent for some years. Even this nominal growth will not
come without innovation to increase productivity, enhance quality and cut costs. And importantly, the race to be
at the forefront of global innovation has intensified. India's economy and enterprises must be prepared to face
increasing global competition. "Make in India" must therefore attempt pushing Indian industry through global
competition into a tsunami of innovation. It must not be misappropriated for primitive protectionism or
misunderstood to imply insular industrialisation.
The "Make in India" initiative is at its core a 'call to arms' so that we as a country invest in our most precious
resource- our demography. In a few years India will have the world's largest workforce. It perhaps already is the
world's youngest workforce. Why must our youth be productive and innovative in Silicon Valley alone or help
create financial instruments in only London and New York? To rectify this, we must build the eco-systems and
conditions that can create the most productive, the most innovative army assembled in human memory; a
peaceful army of wealth creators for the society and country.
Skill
"Make in India" is therefore a rallying cry for "Made by India". Its purpose is to arm close to quarter of a billion
youth, between 15-24 years of age, with the tools to be productive. The rallying cry is also immediate. It is to
skill around 500 million workers to innovate, create and add value to the global economy. We have in a limited
way shown this can indeed be done. We have shown it in the automotive sector, which has rapidly become the
seventh largest in the world. We have shown it in refining and petro chemicals where we use the worst quality
raw materials and transform them into top-end products intended for the most discerning markets. We have
shown it in telecom, where we are constantly innovating to empower millions through technology — a
transformation which will soon touch the lives of a billion telephone subscribers in ways not imagined
elsewhere.
But in all these areas we have shown it as an exception—an exception that only proves the rule. What has been
the rule for India? The rule for India so far has been Jugaad. "Make in India" is not Jugaad. Moving beyond frugal
innovation, it means delivering value to the consumer at the bottom of the pyramid, the 800 million or so who
live at less than two dollars a day. The bottom of the pyramid also needs value, and it increasingly demands
value—not just in manufactured products but in services, in transportation and in financial services. They
demand the same value that high net worth consumers of the Atlantic countries demand of their manufacturers
and service providers. "Make in India" is a proposition to "Make for this India." And what is made for this India is
relevant to many communities in Africa, Asia and elsewhere too.
Simultaneously, the "Digital India" initiative offers unforeseen opportunities to small producers, farmers, artisans
and solution providers. It has the potential to ensure that we find an Indian fingerprint in every mosaic, a little
bit of India in everything produced and consumed globally. It offers India the opportunity to leapfrog generations
of industrial evolution and become part of global value chains. It offers the chance to make the informal sector—
employing more than 90 per cent of the workforce—as productive as the formal sector. There is an
unprecedented opportunity to integrate with the global market place, virtually. The "Digital India" initiative can
transform "Make in India" to "Make with India."
Initiative
The "Digital India" initiative is complemented by the Prime Minister's Jan Dhan Yojana, which has far greater
power than any similar initiative to transform the lives of the excluded. Fifteen million bank accounts were
opened in one day, and potential remains immense. Jan Dhan Yojana can be a basis for providing access to rural
credit, crop insurance, loans to scale MSMEs, and for families and individuals to respond to special events and
calamities. Financial inclusion is the building block for unleashing the creative capabilities of this country.
When these three initiatives can be synchronised and skilling the workforce made central to each of them, the
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“India and the United States: Building Strong and Sustainable Economies for Our People”: Remarks by Ambassador Richard R. Verma at Indian Business School, Hyderabad
Hyderabad | February 23, 2015
(As prepared for delivery)Dean Rangnekar, thank you for that kind introduction. I’d like to begin by welcoming members of the many business chambers with us here tonight: the American Chamber of Commerce, the Confederation of Indian Industry, the Federation of Indian Chambers of Commerce and Industry (FICCI), the Indo-American Chamber of Commerce (IACC), and the National Association of Software and Services Companies (NASSCOM). I’m happy to see that so many of you have taken time out of your schedules to discuss this incredibly exciting moment in the economic relationship between India and the United States, and to think about what we can do to make sure that the relationship is working for all of our people.
I’m also happy to see how many students are with us tonight as well since you are the ones who will be leading this relationship in the years to come. Whether you are from the Indian School of Business, the Narsee Monjee Institute of Management Studies, Aurora's Business School, or the Institute of Management Technology, I know tonight’s event falls in the middle of the exam and job placement season, and so despite the importance of the topic, I’ll try to stay brief!
While all of these are excellent schools, I would like to pause for a minute to acknowledge the accomplishments of tonight’s host institution. ISB’s founding Dean, Dr. Pramath Sinha, happens to be a good friend of mine, and I am simply in awe of how he and all of you managed to create a world class business school in the space of only ten years. I was struck in looking through his book the other day - the aptly titled An Idea Whose Time Has Come – at how from the very conception of the school, Dr. Sinha and his colleagues were determined to build a world-class institution that was also inclusive. This beautiful campus could easily have become just a school for the well-off. The book describes the founders’ early decision that ISB’s admissions process would remain entirely based on merit, and they stood their ground on the issue despite plenty of criticism from the skeptics. Now, with the help of a robust loan and scholarship program, admission is entirely need-blind, and ISB is rated among the top business schools in Asia. I can’t think of any better setting—one that so perfectly merges excellence with opportunity—for the discussion we can have tonight.
These are exciting times for our two countries. I think the historians will look back on this period – and President Obama’s recent visit in particular – as a transformative time in our bilateral relationship. If it
seems like half of the President’s cabinet was here, or will be here, that’s about right. These high-level visits reflect the excitement about our deepening friendship and the good path we are on together. Tonight I want to talk about the economic relationship between our two countries, why it matters, some areas where our partnership really has an impact, and some of the challenges that we confront which prevent us from closer economic cooperation.
Common Purpose – Shared Successes
In recent weeks, I have had the good fortune of traveling around India and I have been able to see first-hand the renewed enthusiasm and confidence in the economy, the great potential for US/India business collaboration, and the positive spin-off effects that are possible in both countries. Only a few days ago, I was in Bangalore for the Aero India show – and while it was an impressive display of Indian military power, I was equally impressed with the number of US companies, from the very large to the start-ups, that were already collaborating in India in the aerospace and defense sectors. I was thrilled to see how much trade, joint research and collaboration, and development were taking place among smaller and mid-sized companies too. During the President’s visit, we were able to formally announce four pathfinder projects and two working groups – on aircraft carriers and jet engine technology – under the Defense Technology and Trade Initiative. Who would have believed such cooperation was possible even a few years ago.
I also know that here in Hyderabad, US companies employ several hundred thousand workers, and are involved in every sector of the economy. The joint ventures here, including the cutting-edge defense projects, are well known. Would you have ever thought part of the U.S. President’s helicopter would be assembled here?
When I traveled to Gujarat recently, it was terrific to see first-hand a massive new Ford automotive factory that will produce state of the art vehicles for Indian and the Asian markets, where hundreds and eventually thousands of skilled workers will be employed. The facility gives Ford, an iconic US company, a great platform in Asia, which is not only good for workers in Gujarat, but also for workers in Detroit and beyond. It’s same story with GE. In Pune with the Prime Minister just a few days ago, I was able to tour their new advanced manufacturing facility, where four different product lines would be operated from the same plant, and where 25% of the workforce would be women. As I learned from the GE team, the innovation, research, and development will take place across borders – so while the manufactured part may be from the Pune plant – it’s likely that engineers in Pittsburgh or elsewhere in America – helped contribute to the final design, it’s functionality, and its distribution. That’s how modern manufacturing takes place.
But the economic relationship between our two countries is not just about large companies coming here to build factories. It’s about shared prosperity on all levels. When I was in Kolkata just three weeks ago, I was able to meet with the American founders of Sari-Bari, a for-profit NGO that provides good jobs, education, and training to women who were once part of the commercial sex trade, and who were looking for a better life, a stable income, and good job. Sari-Bari just does that, taking used saris and converting them into handbags, wall hangings, and other distinctive items. They’ve sold goods to major European and American retailers for sale in their stores, they’ve made a profit, and at the same time, they have changed the lives of women who otherwise would not have had much hope. Yes, you can do well by doing good.
Another compelling example involves the United States–India Science & Technology Endowment Fund , a public-private partnership that promotes innovation and entrepreneurship for the public good. Some of the work that we see coming out of this partnership today is extremely impressive. To take just one example, Rajasthan’s JaipurFoot Organization is the largest provider of prosthetic limbs in the world. So, when some engineers at Stanford University thought they had found a way to reduce the price of prosthetic knees from $15,000 and make them affordable to all those who need them, what did they do? They brought their new design to the JaipurFoot Organization, which was able to bring together the experience, technical expertise, and manufacturing capability to create a product that has now been fit onto 6,238 people. Soon, as a result of this exciting collaboration, the price of a high-performance prosthetic knee, typically one of the most complicated and expensive prosthetics to produce, will come down from $15,000 to less than $100.
Hundreds of Indian companies are also operating in the United States and have made significant social impacts with their philanthropic initiatives and community engagements. To take just one example from here in South India, Shri Govindaraja Textiles (SG Mills), is a third-generation, family-owned business. In May 2014, Governor Pat McCrory of the U.S. state of North Carolina announced that SG Mills plans to open its first U.S.-based operation in Eden, North Carolina. The company will invest more than $40 million and create 84 direct jobs and hundreds more indirect jobs in just the next two years, in a city that has suffered through difficult times with the decline of its own industrial economy. Eden has been a proud textile town since the establishment of the county’s first textile mill in 1792. And with its investment in Eden, North Carolina, SG Mills is not just generating employment, but also becoming part of an American town’s story and ability to maintain its traditions.
I could go on, and list the success stories – there are so many of them. We know this is a positive story because the data tells us so. Two-way trade between the US and India has nearly quintupled in the last dozen years from $19 to almost $100 billion. Defense sales have gone from virtually 0 to $10 billion in only a decade. Indian companies now employ tens of thousands of American workers, and US companies employ even more back here in India. But we also know the data shows that we have barely scratched the surface on what is possible. Only 1% of US exports come to India, and only 2% of America’s imports come from India. That’s not enough. And, given the size of our two economies, no one should be satisfied with $100 billion in two-way trade. That’s why the President has called for another five-fold increase – to $500 billion in the next dozen years. We know we can get there and we will try to do so even faster than that.
Why the Partnership Matters
We seek this enhanced economic partnership for a number of reasons. As the President said when he was here, India’s rise is the interest of regional and global stability, and global economic growth. If our two economies are growing together, we can be a powerful engine for prosperity across the globe. Our interests in this region, and across Asia are also aligning more and more. The fact is that Asian economic integration is good for economic prosperity and for stability. Our rebalance to Asia is aligned well with India’s Act East policy. When the countries of Asia are trading and working together in an open, fair, rules-based commercial order – that’s good for society, for working people, and for the bottom line.
But on the micro level too, our economic cooperation is critical to impacting the lives of so many. The fact is our businesses have been closely cooperating for many years. It is through this rich network of commercial relationships, where personal connections are often forged, where trust is deepened, and bonds are established for the long-term. The reality is that businesses and commercial transactions can move faster than governments – and that’s a good thing. With the touch of a key-stroke, deals can be forged, information exchanged, and services provided from New Delhi to New York, Hyderabad to Houston.
But perhaps most importantly, the growth of economic connections between our two countries is good for ordinary people; people who want the same things, whether they are in India or the United States – a good job, a safe community, and the prospect that their children will have a brighter future. All of us know that economic growth rates and statistics alone cannot be sufficient, unless that growth creates the opportunity for a better way of life, and a more sustainable future, including and especially for those at the base of the economic pyramid. As President Obama asked in his annual State of the Union address this year, “Will we accept an economy where only a few of us do spectacularly well? Or will we commit ourselves to an economy that generates rising incomes and chances for everyone who makes the effort?”
This is a question that both of our countries have to answer, but I believe that we can do more to create the kind of economy that lifts our people and reflects our values if we work to build it together. The United States—our companies, our research facilities, and our people—wants to work with the business and thought leaders in India to create innovation-based economic growth that doesn’t just provide worthwhile jobs to the students with us here tonight, but eventually to the employees you will hire and the generations that will follow. We share in the vision of “Sabka Saath, Sabka Vikas,” together with all, development for all.
Going forward, let me mention three areas in particular where we are pleased to be partnering with India: (1) financial inclusion; (2) skills training; and (3) clean energy development.
Economic and Financial inclusion
In his recent visit here, President Obama commended Prime Minister Modi’s “Jan Dhan” Financial Inclusion initiative, and signaled that America wants to be your partner as you progress toward the ambitious goal of 100% financial inclusion. Prime Minister Modi has rightly noted that “financial untouchability” is a scourge on the poor, and that full participation in today’s economy requires savings as well as access to loans and insurance. Financial exclusion in any form prevents us from reaching our full economic potential. For the land-poor farmer, financial inclusion enhances her ability to smooth out normal consumption and manage life’s risks; while for the new urban migrant, it allows him to take advantage of economic opportunities such as starting or growing a small business. From a broader national perspective, we know that financial inclusion has a direct bearing on economic growth rates and correlates with financial stability and institutional integrity.
When Treasury Secretary Jack Lew and I were in Mumbai two weeks ago, we had the opportunity to visit a Unique Identification Enrollment Center in a small local fishing village. We got to see what it meant to the men and women there, some of whom had no identification documents whatsoever, to finally have access to a modern biometric ID card. We also spoke with women who used their new Aadhaar cards to open up bank accounts and learned what a difference bank access, accident insurance, and an overdraft facility had made in their lives. The scale of these undertakings – 800 million enrolled in Aadhaar so far, and 125 million in the Prime Minister’s Jan Dhan Yojana – is remarkable, and it doesn’t end with banking and insurance. India’s rapid financial inclusion campaign will enable direct benefits transfer and improve the efficiency of vital welfare programs as well.
Already, through the sheer demand that biometrically enabled ID systems have created, prices of Aadhaar-compatible iris scanners have gone down from hundreds of dollars to just $50. Nandan Nilekani, who conceived of Aadhaar and led the effort as its first chairman, foresees a time when even a $100 smart phone will come loaded with an iris scanner, bringing reliable banking services within the reach of everyone.
It is part of President Obama's pledge of U.S. support for this vital goal, the Government of India and the U.S. Agency for International Development (USAID) are finalizing an agreement to establish a public private partnership with key U.S., Indian, and international organizations to support the Government of India’s efforts to create an inclusive digital economy.
Skills
Second, let me just say a word about skills training and education. As President Obama pointed out in his speech at Siri Fort, the majority of India’s people are under 35 years old, and in not too long, India will become the most populous country in the world. This is sometimes referred to as India’s demographic dividend, but cashing in on that dividend won’t be easy. Young people need access to modern skills training and a good education, one that prepares them for good jobs and molds them into responsible citizens.
Today, the State Department is working closely with the Ministry of Human Resource Development to help U.S. community colleges partner with Indian polytechnic schools, improve curricula, and build stronger links with industry. The first American community colleges were established around 1900 at a moment when the United States was itself struggling to train large numbers of skilled workers and improve our higher education system. The concept has evolved over the past hundred years, and their primary feature today is one of openness: providing students with a stepping stone to attain the skills they need, or to reach the highest levels of academic study. They provide students the opportunity to learn new skills, re-enter the education system, and transition between the vocational and the formal education tracks. Working together, our countries can build top-quality institutions to help millions of young Indians get the skills they need to make a stronger India.
Climate Change
Third, I wanted to note a few of our initiatives together in the clean energy arena. During his Republic Day visit, President Obama reminded us that 2014 was the hottest year ever on record, and that India has already started to feel the impact of a warming planet with water shortages, melting glaciers, severe monsoons, and intense droughts. That is why we are committed to support India’s ambitious targets on renewable energy, including its target of achieving 100 gigawatts of solar capacity by 2020. The U.S.-India Partnership to Advance Clean Energy has already mobilized over $2.4 billion to invest in clean energy projects here, and the U.S. Export-Import Bank is ready to make an additional $1 billion available to finance clean energy. Meanwhile, our U.S. Agency for International Development is helping to build the capacity of India’s power grid and integrate renewable energy. And, of course, our breakthrough understanding on civil nuclear cooperation will help open the door to US built reactors helping to provide electricity to the 300 million people who currently go without it.
Challenges
So, if this is all the good news….what’s the flip side of this story, and where do the pitfalls and obstacles lie? Let me mention a few. India continues to be perceived as a tough place to do business. It ranks, as you well know, at 142 in the World Bank ranking measuring the ease of doing business. Investor confidence is still shaky.
Intellectual property enforcement is perceived as weak. And many sectors still remain closed to outside investors and businesses. We know that the Prime Minister has made rationalization of bureaucratic procedures a high priority on his list of reforms, and we eagerly anticipate substantive progress in this direction. One hotel chain CEO recently mentioned that it takes on average 80 permits to build a hotel in India, but only six in Singapore. Moreover, according to the World Bank, it takes an average of nearly four years to resolve a commercial dispute here—the third longest average in the world—while creditors wait even longer, 4.3 years, to recover funds from a company that’s become insolvent. Indian courts face a backlog of 30-40 million cases nationwide, and companies simply cannot afford to invest in or provide financing for an economy where legal justice comes too late, when it comes at all. As they say, justice delayed is very often justice denied.
Some of these challenges could be addressed by a high-standard Bilateral Investment Treaty, and that’s why the United States remains committed to negotiating a BIT with India. A high-standard BIT will give assurance to those people and companies who want to create jobs and invest in India’s future and it could even lead to a more comprehensive bilateral agreement between our two countries.
And the United States and India have more of a common interest in intellectual property rights than many of you may think. If India wants the best technologies, newest products, and innovations, then it must also be known for the best intellectual property protection regime. This is not only in the interest of US innovators, it’s also in the interest of Indian scientists, artists, and filmmakers, who often lead the world in their respective fields, and who will also want and deserve to have their intellectual property protected. Everyone knows, for example, that India is home to the largest film industry in the world, but according to a report by Ernst & Young, the industry loses about $4 billion a year due to piracy. It’s not sufficient to talk about the importance of innovation, we must also protect it, whether it’s a work of art or a life-saving medication.
Ultimately, questions about the openness of the Indian economy, the effectiveness and efficiency of legal proceedings, the protection of IP, the burdens of licensing or the transparency of government decision-making are questions to be resolved by the Indian people. I would only say that experience tells us that economic reforms, legal certainty, enforceability, and transparency are hallmarks of successful economic systems with high investor confidence, and potentials for growth that will lift more people into the middle class.
In Closing
Many of you have already heard my father and mother’s stories – which are similar to so many others in this room – they showed up in America with only a few dollars, and with a dream of a better tomorrow. Those dreams of ordinary people exist in both of countries, and it’s up to all of us – the leaders here assembled today – to see that those dreams are given a chance to become a reality. If we do, we can not only help transform the lives of millions, we can also continue to pull our two countries
– the best partners -- closer together. Both of our countries may face fiscal and economic growth challenges in the coming years, but clearly working together, our economies are stronger than they are by themselves. And so long as there are great institutions like yours , promoting opportunity and achieving excellence for all, I’m excited and confident about our future together. Thank you, and chalein saath saath.
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Modi Government’s quest for meaningful legislative reforms18 February 2015 03:39 pm
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“There is bound to be resistance to change or reform. But it cannot be done in stealth”
- Narendra Modi, Prime Minister of India, at G20 Plenary Session in Brisbane, Australia
Introduction
Reforms, in any area of governance, are a function of political will. Managing the balance of power within the government and the continued trust and goodwill of the electorate are factors which serve not only as the source of political will but also nourishes and sustains it. This is more pertinent in a parliamentary democracy like India, with its demographic and territorial size, its diversity as also its federal structure and constitutional distribution of legislative powers between the Union and the State legislatures.
The National Democratic Alliance government led by the Bharatiya Janata Party (BJP) came to power in May last year with a massive mandate. The general elections saw the worst ever electoral defeat of the Indian National Congress party which had headed a coalition government for a decade and for much of post-independence India. The last years of the previous regime were mired in a series of corruption scandals, unwise economic decisions, oppressive business environment, and ultimately a policy paralysis, that severely corroded the image of the government among the electorate.
The BJP, lead by Mr. Narendra Modi, successfully tapped into the voters’ sense of despondency with the promise of high economic growth and a responsive administration. The new Prime Minister, Mr. Modi enjoys almost unquestioned authority in the Government. His party is the single largest in the Parliament and is in power in at least 7 Indian States, which gives him ample power and opportunity to bring in legislative changes to fulfil his economic agenda.
The journey so far
Mr. Modi’s stamp as an efficient, result-oriented administrator as the Chief Minister of the State of Gujarat is seen in his lean cabinet, placing of key party legislators in critical ministries and empowering of bureaucrats to cut red-tape and innovate. Early initiatives give a glimpse of the government’s wider vision of creating a growth-oriented ecosystem.
The National Mission for Financial Inclusion (Prime Minister’s Jan Dhan Yojana) is an ambitious project which aims to provide every household in the country with at least one bank account. It is an effort to bring millions of India’s poor into the financial mainstream and ensure direct transfers of subsidies to the bank accounts of intended beneficiaries. 15 million bank accounts were opened on the very first day of the Mission.
Inspired with the vision of converting India into a global manufacturing hub, the government conceptualized the ‘Make in India’ initiative. It is expected to help create over 10 million jobs, spur growth and boost per capita income. Concomitantly, some positive steps have been taken to introduce flexibility in labour laws and focus on skill development. Measures to end ‘Inspector Raj’ with a system that is expected to sharply curb the element of discretion with labour inspectors and a single window compliance process for companies on labour-related issues. The six schemes which have been streamlined are universal account number (UAN) for subscribers of the Employees Provident Fund, on-line compliance system for labour laws, a new labour inspection system, a revamped Industrial Training Institutes (ITIs) and apprenticeship scheme to give requisite skills to the workforce. The health insurance plan for unorganised sector workers is also being tweaked.
Reflecting Mr. Modi’s mantra of ‘minimum government maximum governance’, one of the first initiatives of the government was to identify 288 archaic and redundant legislations for repeal as promised during his election campaigns. Many of these laws date back to the colonial era and the post independence phases of law making where the government commanded economic activities. Of the 3000 odd Central laws and numerous subordinate legislations, there are many that have long outlived their utility, are repetitive, and inconsistent with later amendments. This maze of confusing laws is fraught with legal risks and uncertainty creating a payoff culture for those who can afford to wriggle out of contraventions and an overburdened judiciary.
Another area of concern for the global investors has been environmental clearances required for various projects. The laws and procedures are opaque and prone to rent seeking and have little relevance to changing needs. The government set up an expert committee to review forests and environment laws with the aim to integrate environment, economic and social concerns in the development paradigm. The committee’s recommendations not only aims at making it easier to set up industrial or infrastructure projects, but also ensures that those who flout pollution norms or violate green laws are penalised heavily. It has also recommended settling on a definition of ‘forest’ and identifying ‘no go’ areas with over 70% tree canopy. The committee has recommended creation of new institutions — National Environment Management Agency
(NEMA) and State Environment Management Agencies (SEMA), a new All India Environment Service, a ‘national laboratory’ that will host a databank of all environmental parameters, and introduction of digital and non-tamperable methods of monitoring compliances.
Allocation of natural resources, one of the most corruption-ridden sectors, has also received attention of the government. In the coal sector, the government has ,allowed mining by private companies, bringing in trading practices of international standards, granting more autonomy to government run coal companies and setting up a coal regulatory authority.
The economic growth ecosystem cannot be complete without a business friendly tax regime. The long pending Goods and Services Tax (GST) Bill has been introduced in the winter session of Parliament. The GST will integrate the indirect taxation schemes across the country. Bilateral advance-pricing agreements (APA) are also on the cards with major Japanese Corporations, with Mitsui, Toyota and Marubeni being the first ones to do so. It is also been widely reported that India will soon renegotiate its tax treaties with Germany, France, Singapore, Italy and South Korea to pave the way for bilateral APAs with those countries.
The government is also working on subsidy reforms cutting wasteful subsidies on fuel, fertiliser and food. Diesel pricing has been deregulated. The first subsidy reform on cooking gas (LPG fuel) to plug leakages got off the ground from 1 January 2015 with all subsidies going into the bank accounts of the intended beneficiaries.
A comprehensive “Communications Bill” to overhaul the way in which the telecom sector is presently regulated is on the anvil. This sector was hit by major corruption scandals during the previous regime. The government has expressed its intent to reduce its role in regulating this sector and limit its focus to issues of security, morality, public safety, and disaster management and to promote competition and optimal use of spectrum. The new Bill is expected to repeal the archaic Indian Telegraph Act, 1885, Indian Wireless Telegraphy Act, 1933 and the Telegraph Wires (unlawful possession) Act, 1950 and the Telecom Regulatory Authority of India Act, 1997.
Another area of reforms to boost investor confidence is the financial sector. The government proposes to implement the Financial Sector Legislative Reforms Commission report that has recommended an overhaul of this sector. The legal and institutional structures of the financial sector lie in over 60 laws and numerous regulations and require harmonizing of contradictory provisions.
Early challenges to reforms
8 months down the road, the gap between the promise and delivery has widened. The government has not been able to pass important legislations in the last couple of Parliament sessions. Opposition parties united to disrupt proceedings over the Sangh Parivar’s (collective term for right wing Hindu organisations - the Rashtriya Swayam Sewak Sangh (RSS), Vishwa Hindu Parishad (VHP) and Bajrang Dal), of which BJP is a part, polarising actions. Articulation of concepts like Ghar Wapsi (reconversion of Muslims and Christians to Hinduism) and Love Jihad (opposition to an alleged movement of Indian Muslims to marry Hindu women) have tested Mr. Modi’s inclusive development agenda. Mr. Modi’s silence in Parliament on the activities and utterances of the Sangh Parivar entities gave the impression of the government’s tacit support to such divisive agenda and ensured that the government was unable to undertake any significant legislative business in the last 6 months.
Government then resorted to promulgating ordinances to bring in some important changes to the legal framework. An ordinance is a temporary legislative measure available to the Executive, under the Constitution, to make laws when Parliament is not in session, subject, of course, to its ratification within 6 weeks from the date of reassembly of Parliament.
Insurance Laws (Amendment) Ordinance 2014 aims at lifting the cap on foreign investment in insurance sector from 26% to 49%.
The Mines and Minerals (Development and Regulation) Amendment Ordinance 2015 provides for competitive bidding through auction route and gives existing mining leases substantial extension providing production stability.
The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Amendment) Ordinance, 2014 has amended the 2013 law removing mandatory “consent” clause and Social Impact Assessment (SIA), in case, the land is acquired for national security, defence, rural infrastructure including electrification, industrial corridors and housing for the poor including PPP where ownership of land continues to be vested with the government.
Citizenship (Amendment) Ordinance 2015 which primarily seeks to change the categorisation of Non Resident Indians (NRIs) from Persons of Indian Origin to Overseas Citizen of India to encourage and facilitate NRIs to be party to India’s growth story through their capital, technical prowess and entrepreneurial skills.
Coal Mines (Special Provisions) Second Ordinance 2014 was re-promulgated because the bill remained pending in the Upper House of the Parliament after being passed by the Lower House.The ordinance route of law making was been widely criticised for bypassing democratic processes. The land acquisition ordinance in particular drew flak for virtually doing away with social impact assessments amounting to taking away land and livelihood of land losers without any scrutiny. Uncertainty of the ordinances lapsing when its term expires if not converted into legislations is hardly conducive to investor confidence, though the government has assured investors that it would call a joint session of Parliament, where the government will have majority, to pass the bills, if the ordinances cannot be ratified by Parliament in the Budget Session starting February 2015. All investments made during the ordinance period will be irreversible whatever the outcome of the ordinances.
The business community and foreign investors have been looking for more signs of economic reforms that were expected of this avowedly pro-business government. The government has been tardy on its plans to disinvestment in public sector undertakings and is unlikely to meet its fiscal deficit target before the financial year ends in March 2015. Little has been heard about the government’s specific plans to reform the power sector where insufficient generation, power thefts and transmission losses plague the electricity distribution companies. The government’s FDI policy is ambivalent, selective in opening of sectors and still denying entry to multi-brand retail.
Judicial reforms and the question of judicial independence
Indian judiciary led by the Supreme Court has played an important role in the realisation of Constitutional ideals. However, the tug of war between the Judiciary and the Executive over the appointments to the higher Judiciary i.e. High Courts and Supreme Court, has seen another turn with the passage of National Judicial Appointments Commission Bill, 2014. The Bill puts an end to the collegium system (appointment of judges by a collegium of senior most judges) which had given the judiciary supremacy over the executive on judicial appointments for over two decades.
The Bill reverses that position by creating a National Judicial Appointments Commission comprising of the Chief Justice of India as the Chairman, Union Law Minister, two senior-most Supreme Court judges and two eminent persons. The two eminent persons will be selected by a collegium comprising of the Prime Minister, Chief Justice of India and leader of the opposition or the leader of the single largest party in the Lok Sabha. Appointments of the Chief Justice of India and other Judges of the Supreme Court and Chief Justices and other Judges of High Courts through the judiciary’s collegium system had been a highly secretive and non-transparent procedure and the quality of judges who held positions in the highest courts were often called to question by the law-makers and the bar.
Conclusion
The beauty of hope is that even when there is nothing perceptively different in the circumstances, it keeps the spirits alive. Mr. Modi’s government through campaigns such as Clean India, Make in India, Jan Dhan Yojana, Beti Bachao Beti Padhao (about saving and educating the girl child), has kept the rhetoric of change alive in the public mind. It remains to be seen how quickly he can recast the legal and institutional architecture of India to meet the demands of an aspiring nation. His Sabka Saath, Sabka Vikas (collective efforts inclusive growth) will come to nought if he is unable or unwilling to keep the Sangh Parivar outfits in check.
*****
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conditions in the real economic sectors,
macroeconomic policies, and strength of our
institutions. In my opinion, India is now at a
juncture where its macros will steadily improve.
Structural strengths have regained focus, with the
policy environment beginning to change. Most
importantly, we see that there is political will to
push forward financial sector reforms now. The
success of the Jan Dhan Yojana over a short span is
an illustration of this. In addition to bringing the
"unbanked" within the ambit of financial services,
the scheme has significant multiplier effects in
terms of efficient targeting of subsidies and
promoting a cashless society via RuPay. Further, the
government and RBI are working on a new
monetary policy framework basis, the Urjit Patel
report, which is expected to be announced soon. So,
reforms in the financial domain have gathered pace
over the last few quarters. To support
infrastructure-led revival in growth, the RBI has
resorted to the easing of some of the financial
constraints too. Going forward, we can expect to see
the RBI broadening and deepening financial
markets, while strengthening banking structure
through newer entries and differentiated bank
licences.
Q: So far, the government has shied away from
big-ticket reforms and focused on incremental
change; perhaps, it feels that the forces of
status quo should not be allowed to get
aggressive and cause trouble. Is this a good
strategy?
A: Let's consider the economic background that
existed over FY12-FY14. Economic growth of sub-
5%, coupled with retail inflation running at twice
that pace, spawned domestic macro imbalances
manifesting in unsustainable deficits that eventually
had an adverse impact on the rupee. The stimulus
aided consumption amid stagnation in investments
due to inadequate governance led to the overall
downbeat sentiment. It was important to break this
vicious loop. The new government has adopted a
"bottom-up" approach via a three pronged strategy,
aiming to create "absorptive capacity" in the
economy before embarking on big-ticket reforms:
* It has maintained policy continuity where it was
necessary, e.g., the use of Aadhar based platform
for efficiency in subsidy disbursement.
* Fine-tuned policy as per the evolving economic
dynamics—e.g., the announcement of rule-based
coal auctions, moving ahead with changes in the
gas-pricing formula and land reforms.
* Introduced prudent changes in areas like
bureaucracy and policy formulation, e-clearances
for projects, buffer stock management for curbing
food inflation, gradual FDI liberalisation, labour
reforms, and diesel price deregulation.
I would call this an incremental change approach
with the acceleration of micro reforms. While at the
singular level, these could be perceived as small
steps, the collective impact of all these micro
reforms will be instrumental towards removing
investment hurdles and improving ease of doing
business in India.
As far as big-ticket reforms are concerned, the
vision has already been laid out. In the coming
years, focus will remain on efficiency (GST,
Digitization, Smart Cities, Skill India) and inclusive
(Rurban schemes, Jan Dhan programme) economic
growth (Make in India).
Q: What are your expectations from the Budget
for the financial sector in particular and the
development in general?
A: The FY16 Budget will be the first full-scale
statement of intent by the NDA government. At the
macro level, I expect the Finance Minister to
continue on the path of gradual fiscal consolidation
while improving the quality of adjustments by
focusing on introducing efficiency in revenue
expenditure and prudently using the space for
capital expenditure to occasion private investment
and capital formation. In terms of specifics, I expect
a rolled-out roadmap for a well-focused
disinvestment programme, incorporation of
recommendations of the Expenditure Management
Commission, steps towards gradual corporatisation
and monetisation of Railways, and increased
budgetary allocation for sectors like infrastructure,
housing, education and skills. Last, but not the
least, it should pave the way for implementation of
GST from April 2016.
From the perspective of the financial sector, I
expect the Budget to announce measures to
increase household financial savings in bank
deposits, equity instruments, and alternative saving
avenues like REITs. In addition, I look forward to a
long-term plan of action for recapitalisation of
public sector banks, and incentives for the
development of corporate/municipal bond market to
augment growth of Smart Cities in the country.
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The International Monetary Fund has lowered India’s economic growth forecast by 1 per cent to 5-6 per cent for 2012-13. The IMF in its latest World Economic Outlook report said, "Growth in India is projected to average 5-6 per cent in 2012-13, more than one percentage point lower than in the April 2012 WEO (World Economic Outlook)."
"The downgrade reflects both an expectation that current drags on business sentiment and investment will persist and a weaker external environment," the report said. Released in Tokyo ahead of the IMF-World Bank 2012 Annual Meetings, the report said that the growth has weakened in the first half of current year due to deteriorating business sentiment and stalled investment due to governance issues.
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The report presented a gloomier picture of the global economy than a few months ago, saying prospects have deteriorated further and risks increased. The IMF’s forecast for global growth was marked down to 3.3 per cent this year and 3.6 per cent for 2013.
The multilateral agency said advanced economies are projected to grow by 1.3 per cent this year, compared with 1.6 per cent last year and 3 per cent in 2010, with public spending cutbacks and the still-weak financial system weighing on prospects.
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Nitesh Srivastava
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By Nitesh Srivastava | Submitted On September 10, 2014
Indian PM Mr. Narendra modi launched Jan Dhan Yojana, a mega financial inclusion plan for poor and common man having no access to formal banking facilities. The objective is not only to help establishing formal banking system in India for all but also to have centralized banking by the government of India. This will in turn bring economic development and strengthen the government by accumulating funds to India rather than routing funds to international foreign banks. This is a great initiative that will not only help all classes in India, but also bring social and economic growth across the nation.
Narendra modi's financial inclusion drive is to help the poor open bank accounts and to integrate the poorest with formal banking system in India. On the other hand, its attractive benefits to account holders as debit cards, overdraft facility up to Rs 5000, accident insurance cover of Rs 100000, life cover and medical
cover of Rs 30,000. The high aim is to help poor who do not have bank accounts and are not aligned to the Indian national banking system.
The Prime Minister aims to integrate 7.5 crore households to have bank accounts by next year. This initiative will help allow people from rural and urban areas to open bank accounts with PM's Jan Dhan Yojana. Integrating common man is great initiative to centralized banking system in India and people from villages who have no access to banking facilities will be greatly benefited. This will be facilitated with 7000 branches and 20,000 new ATM centers in the country.
Government of India provides many other schemes for the welfare of its citizens, but the benefits are not reached to common man. Post Offices are fully government owned bodies and provide many policies for the benefit of citizens. These are safe investment options allowing great savings and earn good interest on long term investments.
There are many such policies by IPO like Kisan Vikas Patra, National Savings Certificates (NSC), Public Provident Fund (PPF), Senior Citizen Savings Scheme, Post Office Monthly Income Account Scheme, Post Office recurring deposit and savings account etc.
There are several benefits of investing in post office schemes:
- These schemes are offered directly by Government of India. - Safest, secure and risk-free investment options. - No Tax Deduction at Source (TDS). - The instruments can be purchased from any Post Office anywhere in India. - Attractive rates of interest
Post office savings as an Investment avenue is most convenient for investors from all classes, this is common not only in urban but also rural areas. The Indian Postal Services and the schemes offered by it, have gained high public trust and confidence of common people. India possess the largest network of postal offices in India with nearly 160,000 branches spread across the country.
Various accounts offered by Indian Post Offices include:
Savings Account: Post office savings account works same as savings account in a bank. This is convenient for people in rural areas who have limited banking facilities. This account can be opened with minimum of Rs.50 and maximum of Rs.1,00,000 by an individual.Withdrawal from the account is by cheque and there is no restriction on withdrawals, unlike commercial banks. Interest earned from your savings is tax free under section 80 of income tax act and interest is higher by 1 to 2% than other commercial banks.
Post Office Recurring Deposit Account: Recurring deposit account is systematic way of saving money. The scheme is meant for those investors who want to deposit a fixed amount regularly on monthly basis in order to get a tidy sum after 5 years on the maturity of the account. The recurring deposit account can be opened at any post office. Period of maturity of account is 5 years. Sixty equal monthly deposits shall be made in an account in multiples of Rs.5 subject to a minimum of Rs.10. The scheme covers free life insurance cover after receiving contributions for 24 months on account of denomination of Rs. 5, Rs. 10, Rs. 15 or Rs. 20. One must have no withdrawals or defaults during the first two years to enjoy all benefits of the policy. Premature closure of account is permissible after expiry of three years. In case of premature closure of account, the interest at the rate applicable to post office saving account shall be payable.
Post Office Monthly Income Scheme (MIS): is one investment option which offers guaranteed regular monthly income post its maturity and very good returns with annual rate of interest from 8.4% to 9% good as any fixed deposit with banks. The Post Office Monthly Income Scheme (MIS) provides for monthly payment of interest income to investors. It is meant for investors who want to invest a lump-sum amount initially and earn interest on a monthly basis for their livelihood. The scheme is therefore, a boon for retired persons.
However, there is a need for little improvement, private companies do a lot of promotion and reach out to every individual who also may not be interested to purchase a policy will tend to buy. Private companies are just a phone call away and the agents would reach to interested individual in person. However, so is not the case with government policies, one has to really struggle to buy a policy. Post offices are easiest and convenient options to reach out to every individual and masses.
What is required in favor of citizens is, to promote these government policies and reaching out to masses. Most the post offices in small villages will have these schemes available at only the centralized post offices. People who want to buy these policies do not have the buying options through online, or by visiting nearest post offices. They are routed to the central bank to purchase these policies. If a person is interested to buy a policy by government or post office, his interests should be served by providing door to door service or at nearest post offices.
Great savings account opening and income saving options provided by government of India.
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