Spotlight
New Delhi, 14 September 2018
Jan Dhan Yojana
IT BECOMES SWEETER
By Moin Qazi
India’s flagship
financial inclusion programme, the Pradhan Mantri Jan Dhan Yojana (PMJDY), got
a big boost as the Government is set to lace it with several sweeteners. The
Cabinet has doubled the overdraft
limit to Rs 10,000 and allowed holders of such no-frills accounts to withdraw
as much as Rs 2,000 without any conditions. The age limit for availing of such
overdraft facility has also been raised to 65 years from 60 earlier.
The PMJDY, under
which 32.54 crore accounts have been opened since inception, would now be an
open-ended scheme. The PMJDY accounts, 83% of which are Aadhaar-seeded,
collectively have deposits of about Rs 81,200 crore now. Free accident
insurance cover on RuPay card for new Jan Dhan accounts has also been doubled
to Rs 2 lakh.
As per the existing
scheme, an overdraft facility of up to Rs 5,000 is available to one account
holder per household after six months of satisfactory conduct of the PMJDY
account. The objective of PMJDY, which was launched in August 2014, is to
ensure access to various financial services through these basic savings
accounts.
Access to the right
financial tools at critical moments can be a key element in overcoming stubborn
realities. It can provide an opportunity to move out of poverty or absorb a
shock without being pushed deeper into debt. The poor need to set aside money
in times of plenty and draw it out in lean times. Without a safe place to save
money, it’s difficult to cope with the unexpected or to plan for the future.
Without access to affordable credit, it is difficult to get a business idea off
the ground or to acquire an asset like a house or higher education. Without
insurance, all your security can be wiped out by one misfortune. Financial
services allow you to insure for health care, save for children’s education,
and borrow for wedding or funeral costs.
There are basically
three financial needs of the poor:
Life cycle needs:
Life cycle events that impose financial burdens include births, deaths,
marriages, education, home-making, widowhood, old age, and the need to leave
something behind for one’s heirs.
Impersonal
emergencies are caused by floods, cyclones, and fires etc., while personal
emergencies include illnesses, accidents, bereavement, desertion and divorce.
Financial and
life-style opportunities can require large sums of money for starting or
running businesses, acquiring productive assets (including land and housing),
or buying life enhancing consumer durables (fans, radios etc.).
Access to a
transaction account is a first step toward broader financial inclusion. As
accountholders, people are more likely to use other financial services, such as
credit and insurance, to start and expand businesses, invest in education or
health, manage risk, and weather financial shocks, which can improve the
overall quality of their lives.
To use financial
services to their full potential, to protect their families and improve their
lives, the low income people need products well suited to their needs. Bringing
this about requires attention to human and institutional issues, such as
quality of access, affordability of products, sustainability for the provider
of these services, and outreach to the most excluded populations.
Recall the PMJDY scheme
was launched on 15 August 2014 with a target to provide universal access to
banking facilities. This scheme is the now the most powerful driver of
financial inclusion. It consists of six pillars: Universal access to banking
facilities; providing basic bank accounts with overdraft facility and RuPay
Debit card to all households; Financial literacy to enable use of financial
products; A credit guarantee fund to mitigate risks stemming from overdraft
facilities extended to these accounts; Micro-insurance for all account holders
under PMJDY, and Pension schemes such as Atal Pension Yojana
The opportunity to
reach the financially excluded with a new generation of financial services now
has huge developmental as well as commercial potential. One of the ways for
accelerating this path is through digital financial inclusion. It is perhaps
the most powerful tool to unlock the most value for those at the bottom of the
pyramid. Although digital technology is opening new channels for delivering
financial services, challenges persist. Sparse populations, inconsistent
network coverage, lack of trust, or insufficient capital for building new
business models, can stand in the way of success, particularly in connecting
remote or underserved communities.
The most revolutionary
recent development in the financial inclusion space is the entry of two
categories of small and nimble financial institutions. Designed to offer
financial services to the underserved, small finance banks (SFBs) and payments
banks began their operations in 2017. It’s still early days to assess the
impact of these entities on financial inclusion. But they can complement the
efforts of mainstream banks in expanding the footprint in the financial
inclusion space.
The latest entrant is
India Post Payments Bank. It will offer a range of products—savings and current accounts, money transfer,
direct benefit transfer, bill and utility payments, enterprise and merchant
payments. Customers will be able to access all products and services across
various channels—over-the-counter services, micro ATM, mobile banking app, text
messages, phone calls. The payments bank will also provide access to
third-party financial services such as insurance, mutual funds, pension, credit
products and forex.
A payments bank is a
differentiated bank, offering a limited range of products. It can accept
deposits of up to ₹ 1 lakh per customer. Unlike traditional banks, it cannot
issue loans and credit cards. India Post Payments Bank will offer three types
of savings accounts—regular, digital and basic—at an interest rate of 4% per
annum. It will provide doorstep banking facility at a charge of ₹15-35 per
transaction. The limit for doorstep banking is ₹ 10,000.
A number of Government
agencies are also actively involved in efforts to deepen financial inclusion. Most of these are reaching previously grossly neglected groups, such as
women. Their contribution has been quite significant and noteworthy.
India is certainly on
the cusp of a vibrant financial revolution and is poised to making full
financial inclusion a reality. But it will require bold innovation, hard
timelines, practical policy reorientations and fundamental shifts in business
models to make the financial lives of the poor simple and fulfilling.---INFA
(Copyright,
India News & Feature Alliance)
|