In a record of sorts, nearly 1.5 crore people, hitherto alienated from the country's formal banking system, got access to financial services on Thursday with the launch of the ambitious, and probably risky, Pradhan Mantri Jan Dhan Yojana. Even as Prime Minister Narendra Modi launched the scheme in New Delhi, officials from various banks simultaneously brought financial services to 77,852 towns, villages and remote hamlets across the country.
Although India has a vast banking network, access to financial services is limited. Thousands, including farmers and self-employed people, do not have access to banks and end up borrowing money at higher interest rates from local money lenders. The Modi government hopes to fix this lopsided access to service with the Jan Dhan Yojana.
"To eradicate poverty, we have to remove financial untouchability," PM Modi said at the launch. "What kind of a system is this wherein a rich person gets a loan at a very low interest rate and the poor, who should get loan at low interest rates, has to pay five times more to avail credit from local money lenders.
Under the scheme, those who are poor and do not have a bank account, will be able to open a zero-balance bank account, which will be kept alive even if it is not operated. Along with the account, the holder will get a debit card, mediclaim worth Rs 30,000 and accidental insurance coverage of Rs 1 lakh. A good customer will also become eligible for an overdraft facility of up to Rs 5,000 after six months.
The government wants to open at least 15 crore bank accounts for the poor in the next four years. Banks, both private and public, have been brought onboard to open these bank accounts. But it wasn't entirely clear if the government will identify poor people without bank accounts for the scheme. "We had targeted to open one crore accounts today (on Thursday). However, given the response from across the country, I think we will surpass the number," said finance minister Arun Jaitley.
PM Modi, however, took the opportunity to take a dig at corporate defaulters, such as liquor baron Vijay Mallya's Kingfisher Airlines, for turning bank loans into non-performing assets (NPAs). "A poor man does not falter on payments to the banks," said Modi. "We have seen what the rich guys, who take loans from banks do."
Sources in the finance ministry said that the PMO is keeping a watch on banks' rising NPAs, estimated to be Rs 2 lakh crore. The ministry has asked banks to expedite NPA-related matters. "The ministry has instructed the State Bank of India to act fast on the account of Kingfisher, which owes about Rs 7,000 crore to a consortium of banks," a source said.