Thursday saw the roll-out in a single day of bank accounts with accident insurance cover of Rs 1 lakh for nearly 1.5 crore families. The families will have access to banking services, insurance and the free credit card RuPay, bundled together.
Nowhere in the world have so many families been connected with a country’s financial system. This, hopefully, will end an era of what Prime Minister Narendra Modi called “financial untouchability” and free the poor from the clutches of moneylenders. Financial inclusion has been the buzzword for several years now, beginning with bank nationalisation.
But, like most good intentions, they were implemented at a snail’s pace, with the result that 67 years after independence only 58.7 per cent of households in India had access to banking services, according to Census 2011.
Government figures indicate that out of a total 24.67 crore households in the country, six crore households in rural areas and 1.5 crore households in urban areas need to be brought under the financial inclusion mission labelled the Pradhan Mantri Jan Dan Yojana (PMJDY).
Earlier governments, and the Reserve Bank of India, had been trying to bring in financial inclusion and the Aadhar card-Unique Identity (UID) number were steps in this direction. But it perhaps required the energy and vision of Mr Modi to get it done on a war footing.
The vast organisational work needed to get the first phase of the PMJDY off to a flying start on Day 1 — through 600 programmes and 77,852 camps — is admirable. It shows what can be achieved if there is political will and leadership.
Now the Department of Telecom will have to get its act together to see there is connectivity in all these villages to facilitate transactions. Technology and mobile phones will be the backbone of the PMJDY.
A whole lot of companies and micro-finance institutions catering to the financial needs of rural unbanked India are waiting to help the government further the PMJDY. The key difference between the earlier programmes and the PMJDY is the RuPay-enabled debit card. The idea is to make the direct benefit transfer scheme more effective.
If the people know they can get all government goodies through the banks, it will encourage them to open bank accounts.
To make this programme sustainable, the government will have to undertake another one of Mr Modi’s visions, namely generation of employment, so people have the money to deposit in banks.
Fears are being expressed about the impact of the Rs 5,000 overdraft that each account holder will be eligible for after a few months of seeing how his account is performing.
Mr Modi and his team are surely aware of this and will have a solution. Meanwhile, all citizens can help by getting their economically weaker associates to open bank accounts.
