 "Open 7.5 cr accounts in a year: Jaitley tells state-run banks")
Finance minister, Arun Jaitley on Thursday asked chairmen of state-run banks to open bank accounts for 7.5 crore unbanked households in the country in the next one year and has asked banks to make good use of business correspondent (BC) and mobile banking model to achieve the target.
State-run banks have been asked to open one account per household, instead of two accounts, as envisaged earlier, Sushil Muhnot, chairman and managing director of Bank of Maharashtra, who attended the meeting told FirstBiz.
“The minister has said that 7.5 crore accounts needs to be opened in next one year. Banks have been given state-wise targets for this and have been assured that all government benefits will be transferred through these accounts,” Muhnot said.
Some of the bankers, who met Jaitley in Delhi, said the target is as “uphill” task to achieve in a period of one year and there are cost implications on rolling out such large number of accounts in rural areas, where it is difficult for them to generate business from these accounts.
The roll out of bank accounts is part of a mega financial inclusion plan of the Narendra Modi government. Modi will announce the plan on the national independence day in Delhi. The plan is to offer two accounts per households.
“They want to cover 7.5 crore households in the next one year, which isn’t an easy task. Let’s see how it goes,” said the chairman of another large public sector bank, who attended the meeting. He didn’t want to be named.
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. “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.
On Wednesday, the government issued an advertisement opening up a competition for “all Indian citizens” to design a logo, name and tag line for the ministry’s financial inclusion initiative. The last dateof submission of the entries is 7 August 2014. The winning entry will be awarded a cash prize of Rs 50,000.
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 accountswith 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. The Rs 5,000 overdraft facility will be offered only afterassessing the performance of the account for a year or so and found “satisfactory, bankers said.
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.
“There are huge cost implications for opening large number of accounts in one go in rural areas,’ said another banking industry official who too declined to be named. " But since the government has given an order to do so, there aren’t any options but to work on this,” said the banker.
Financial exclusion of a large number of citizens have been a major concern for India’s policy makers despite 67 long years of independence, progress of technology and existence of nationalised and private sector banks in the country.
Jaitley on Thursday said about 60% of households have bank accounts in the country. “The objective is to reach every household possible and have at least two account holders in every house. Currently, financial inclusion and the reach of the banking systems extends to about 58-59 per cent and therefore the dark areas which are not covered these include about 7.5 crore households,” he said.
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 asbusiness 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.