By Krati Gupta
Edited by Namrata Calebb, Senior Editor, The Indian Economist
Prime Minister’s Jan Dhan Yojana, came as an avant-garde measure to mark the ‘beginning of the end of financial untouchability’ in India, as Mr. Modi put it. Under the ambit of this scheme, an unprecedented 1.5 crore bank accounts were opened across the country on the inaugural day. In the long run, it is expected to cover 7.5 crore people by January 26, 2015. The beneficiaries will be provided with a zero balance bank account, a RuPay Debit card and Rs 1 lakh insurance cover to help the family in case of an unforeseen eventuality. The people who open bank accounts before 26 January 2015 will be entitled to an additional insurance cover of Rs 30,000. Mobile banking for the poor is also made easy with the introduction of new technology, which enables them to transfer funds and check balance through a normal phone. Hence, smart phones are not required. The banking sector is all set to open up 7,000 more branches, recruit some 50,000 new correspondents and establish 20,000 new ATMs.
Even after 68 years of independence, not even 68% of the Indian population has access to banking. People have mobile phones but they don’t have bank accounts. According to statistics by RBI, 51.4% of farmer households are financially excluded from both formal and informal sources , with scheduled castes and scheduled tribes being on the top of the list. On an average only 58.7% out of 24.67 crore households have access to banking services. 44% rural and 33% urban population have no bank account. As a matter of fact, the total number of bank branches have gone up in recent years, but the rural bank branches have declined. While it’s easy for the rich to get loans at lower interest rates; in lieu of proper banking services and financial literacy, poor are forced to take loans from the money lenders at exorbitant interest rates , which further deepens the economic hiatus in the society.
JDY as a plan of financial inclusion, is a part of PM’s vision of digital India. The government wants to use these bank accounts as a mode of cash transfer, in case subsidies for essential commodities can’t be provided. But as it’s said that the proof of pudding lies in the eating: this scheme will be successful only if it is implemented in letter and spirit by the government as well as other financial institutions, given the enormity and intricacies involved in the task.
In rural areas, government should take measures to promote financial literacy. People should be made aware of how to use the ATM systems and how to deposit and withdraw money via slips, checks etc. The excessive documentation and verification process involved in opening a bank account also discourages the minimally educated rural population and therefore need to be simplified.
The aim should be to help people generate high savings and provide affordable loans to the needy. This will help stall the farmer suicides. Farmers are not getting sufficient remuneration for their produce. The fluctuating weather patterns and heavy dependence on credit borrowed from moneylenders adds to their misery. This has led to a phenomenal increase in the level of debt among the farmers. The government should crack the whip on middlemen, who serve as intermediaries between the bank and gullible beneficiaries and thus dupe them .
Most of the bank branches are located in urban areas and it becomes difficult for a poor labourer/farmer to sacrifice his day’s wages and spend the money on transport, hence they choose otherwise. One bank branch per village should be established and persons such as a post office peon can become the bank correspondent in these cases.
Although both public and private sector banks should work towards financial inclusion, it has been seen that public sector banks are more effective in achieving the same. One, there is more political pressure on them to perform well and two they play a greater role in doling out subsidies related to governmental schemes.
Women inclusion should also be paid special attention in order to make them financially self sufficient and independent. It’s a fact that development of India lies in the development of it’s villages. Banks can also consider providing services in particular Indian languages so as to reach out to the masses.
A financially independent India, if achieved, will prove to be a testimony of acche din.
Krati is currently a Pre final year student pursuing chemical engineering from Motilal Nehru National Institute of Technology, Allahabad. She loves watching movies and posing for pictures. Apart from juggling between the concepts of thermodynamics and heat transfer during college hours, she is a greenhorn at writing and is highly optimistic about exploring the vast horizon in this field . She believes penning down her thoughts will make at least a small difference to the world.