SHAFAQNA (Shia International News Association) – Saritha Rai, Forbes: Prime minister Narendra Modi has unveiled an initiative to provide bank accounts to the poor, a milestone program in a country where over a third of the population has no access to financial services. The new government’s first welfare program was launched a 100 days after taking over.
The Pradhan Mantri Jan-Dhan Yojana (translated as Prime Minister’s people wealth program) was launched on Thursday. The government announced that state-run as well private banks primed for the program had opened 15 million bank accounts on the launch date itself.
Until now, even state-owned banks have balked at reaching rural and poorer parts of India. Thus, over the decades, hundreds of millions of Indians have been financially excluded from organized banking.
This has made them vulnerable to the greed of local moneylenders who charge exorbitant rates of interest to lend money.
But a banking revolution that coincides with India’s mobile revolution could remake the country’s economy.
Already companies have made a start to taking banking services outside their brick & mortar offices and into poor neighborhoods and the countryside equipped with mobile phones and a couple of pieces of inexpensive technology. The street corner grocery stores, for instance, are becoming accessible ‘micro ATMs’ for stripped-down banking services such as cash deposits, loan repayments, transfers and withdrawals.
The bank accounts could turn out to be a double blessing for the under privileged. They could be a window into the world of financial services as also a way to procure an official proof of identity as precursor to opening the account. Modi himself described bank accounts as a step towards the ‘economic mainstream’ and an end to ‘financial untouchability’.
In the program, account holders would receive a debit card, an accident insurance of up to 100,000 rupees ($1,600) and an overdraft facility of 5,000 rupees ($84).
Both state-run and private sector banks have been mandated to support the prime minister’s plan which aims to cover 75 million households by 2018 with at least two bank account-holders.
The massive program would help the government check corruption by paying welfare benefits directly into the bank accounts of the poor. It could improve savings and eventually lead to improved tax collection.