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BW Businessworld

Will Numbers Count Here?

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The rousing  start given to the Pradhan Mantri Jan Dhan Yojana (PMJDY), the ambitious financial inclusion programme of Prime Minister Narendra Modi, has, perhaps, no parallels in the history of Indian banking system. Fifteen million new zero-balance savings accounts (against a target of 10 million) were opened on the day of its launch on August 28, thanks to the active participation of private and public sector banks all over the country. The scheme got operational in just two weeks after Modi announced it in his maiden Independence Day speech. Such a feat was accomplished through day-long camps in over 77,000 locations and participation of 20-odd chief ministers and high ranking officials.

However, the real crowd puller was the scheme itself. Each account, taken as part of PMJDY, comes with a host of benefits like a RuPay debit card with a Rs 5,000 credit facility, Rs 1,00,000 accident insurance cover, and a Rs 30,000 life insurance cover to those enrolling before 26 January 2015.

While there is no doubt about the intention and potential of the scheme, one cannot convincingly conclude that all the 15 million families that opened bank accounts on 28 August are first timers, or that the account opening melas in the coming months will be able to enrol only those people who have never been exposed to the formal banking system.

First, the bank account opening process is so simple that there is hardly any mechanism to check duplication of enrolment. Second, there is no mechanism at this stage to verify the veracity of the declaration by the new account holders that they did not have any bank account. Since unique identification number or Aadhaar is not mandatory for opening bank accounts under the scheme and also there is no way to check bank accounts of people across banks in the country, it’s quite possible for many of the early members of PMJDY to have been enrolled earlier into the banking system. Even among the zero balance accounts opened during the financial inclusion plan of the previous government, more than half are dormant and many such account holders could well have availed of the PMJDY scheme.

Modi wants all 75 million un-banked households to be made part of the financial system by 26 January 2015. Going by the initial enthusiasm, PMJDY will certainly surpass the targeted numbers by the deadline. But that would still not guarantee that all the un-banked households for which the yojana has been specifically created, are on board.
Besides, financial inclusion on such a scale anytime soon may not be possible for banks due to a host of operational and logistical problems, Even if the households, statistically speaking, are included within the banking system, they could be years away from true financial inclusion. As an idea, PMJDY definitely deserves praise, but without all the hype.
— Joe C. Mathew

(This story was published in BW | Businessworld Issue Dated 22-09-2014)


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