Modi invokes imaginative powers of aam aadmi to liven up BJP's mega financial inclusion plan

The Modi-government has invoked the imaginative powers of the aam aadmi to liven up its much-hyped financial inclusion plan, literally. Financial inclusion is the process of spreading banking services to the unbanked segments of the country.

On Wednesday, the ministry of finance posted an advertisement on its website and in leading national newspapers opening up a competition for “all Indian citizens” to design a logo, name and tag line for the ministry’s financial inclusion initiative, which will be officially rolled out by Prime Minister Narendra Modi on Independence Day.

The government is making preparations on war footing to push its mega plan of distributing 15 crore free bank accounts with benefits to unbanked citizens in the far-flung areas of the country.

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“All concerned ministries have been asked to act on an urgent basis to give final shapes to the plan and make it a success,” said a senior bureaucrat at the government on strict condition of anonymity.

According to the advertisement, the last date of submission of the entries is 7 August 2014. The winning entry will be awarded a cash prize of Rs 50,000.

“In order to ensure wide participation and get innovative and catchy ideas for thename, logo and tagline of the programme, it has been decided to have a competition which is open for all Indian Citizens,” the advertisement says.

The ministry plans to roll out the financial inclusion initiative in two phases spanning over four years beginning this August.

In the first phase, the government plans to offer basic bank accounts with overdraft facility of Rs 5,000 and a RuPay Debit Card with inbuilt accident insurance cover of Rs 1 lakh.

The over draft facility will be offered only after satisfactory completion of one year of operations, according to the official quoted earlier. This is most likely to be done by offering an initial overdraft facility of up to Rs 1,000 per account and Rs 5,000 if the performance of the account is “satisfactory”.

The government also plans to run a financial literacy initiative in the first phase.

In the second phase, which will begin on 15 August, 2015, the government will offer insurance and pension products to the unbanked population.

Cracking the inclusion code

Financial inclusion has been a mystery word for India despite 67 long years of independence, progress of technology and existence of nationalised and private sector banks in the country. According to estimates, only 40 percent of the population in Asia’s third largest economy does not have access to formal financial services.

Even though the government and central bank have been pushing for financial inclusion, the efforts have progressed in a depressingly slow pace. The RBI formally launched a three-year financial inclusion programme through state-run banks in 2010 and later followed it up with another three year plan beginning 2013 through multiple channels such as business correspondents (BCs) and issuance of no-frills or zero balance accounts.

In January 2014, an expert panel set up by the Reserve Bank of India (RBI) under Nachiket Mor, a member on the central bank’s board, had submitted a road map to implement financial inclusion in the country.

The panel had recommended giving universal electronic bank accounts to all adult citizens of India by January, 2016. The Modi-government’s plan is, in some way, the idea of Mor in a different format.

According to the finance ministry, India currently has 1.15 lakh branches and an ATM network of 1.6 lakh. Of these, 43,962 branches and 23,334 ATMs are in rural areas.