Why Modi-government’s move to convert DBT accounts to Jan Dhan is a right step

Is your bank account, linked to Aadhaar, a Direct Benefit Transfer (DBT) account? If yes, there are chances that soon it may get automatically converted into a Jan Dhan Yojana account packed with a slew of benefits. A government communication to country’s state-run banks, early this month, instructs the lenders to convert all DBT-accounts to Jan Dhan accounts. [caption id=“attachment_2522936” align=“alignleft” width=“380”]  Reuters[/caption] An official with State Bank of India (SBI), who spoke on condition of anonymity, confirmed this development to Firstpost. “We have already begun the process of converting DBT accounts to Jan Dhan,” said the banker. The story was first reported by Indian Express on Tuesday. For the government, mandatory conversion of all DBT accounts to Jan Dhan, would mean that the number of Jan Dhan accounts goes up substantially. At the last count, 20.19 crore accounts have been opened under the Jan Dhan scheme nationwide with total deposits of Rs 30,108 crore. India has a total of 22.74 crore DBT beneficiaries as on 31 March, 2015, of which 8.34 crore accounts have Aadhaar-seeded bank accounts. This is also a logical progress for the Jan Dhan scheme, since one of the basic ideas of introducing Jan Dhan is to channel all government benefits to bank accounts directly and thus plug subsidy leakages. Presently, there are 36 schemes linked under the DBT through which government is transferring various benefits directly to beneficiaries. The DBT regime kicked off first in January, 2013, during the UPA-regime and was re-launched by the NDA-government in January, 2015. It’s not clear how many of these accounts are Jan Dhan accounts since Jan Dhan was launched only in August, 2014 by Prime Minister, Narendra Modi. Every account was offered free Rupay debit cards, Rs 5,000 loan over draft and insurance and pension scheme facilities. Of the 22 odd crore DBT beneficiaries in India, those who aren’t yet enrolled in Jan Dhan, would benefit when banks convert these accounts to Jan Dhan accounts since they will now get access to facilities such as loan overdraft and insurance facilities. Of the total DBT beneficiaries, nearly 4.7 crore are MGNREGA beneficiaries. If properly implemented, mandatory conversion of all DBT accounts to Jan Dhan could address the issue of possible exclusion of the needy segment from the Jan Dhan outreach. One of the problems when Jan Dhan was rolled out was the rocket-speed implementation of the programme, which forced banks to distribute bank accounts to everyone despite concerns on duplication. In some cases, even those who received Jan Dhan accounts were not well informed the value added benefits of such accounts. Payment banks The expansion of Jan Dhan accounts to the low-income class couldn’t have come at a better time since the banking system is set to witness the entry of small finance banks and payments banks. For payments banks in particular, it wouldn’t be difficult too reach out to the end-consumer in the far-flung areas of the country since many of them are also mobile service operators or have tie-ups with such operators, enabling them make use of the mobile platforms. The good thing is everyone (or at least one person in the family) has a mobile phone even in rural areas, which can be used for basic banking services with the help of banking correspondents. Total number of mobile phone subscribers has reached 100 crore as on October 2015. Jan Dhan accounts may not mean much to the average middle-class and wealthy but more to the lower-end of the pyramid (such as MGNREGA beneficiaries) who have very little cash flows in their bank accounts and can’t afford insurance, pension products otherwise. For them, the Rs 5,000 loan overdraft facility is indeed a big amount. On the whole, it’s a win-win situation for both the DBT holder and the bank to convert such accounts to Jan Dhan accounts since regular cash flows by way of government scheme remittances are assured, hence the question of accounts remaining inoperative doesn’t arise.