Prime Minister Modi has created a record by opening 15-million new bank accounts in a day (August 28th, 2014) and aiming for 75-million in 2 months. This has not just created an tremendous economic stimuli for the under-privileged and un-banked masses of India, but hopefully it will take away the loan sharks and the chit-fund operators who have scammed these masses for over 60 years. The Jana-Dhana scheme aims to accomplish the objective of providing basic banking accounts with a debit card and inbuilt accident insurance. On the eve of Ganesha Chaturthi (Lord Ganesh is worshipped as the god of prosperity and good luck), Modi dedicated the mobile banking facility on the basic mobile phone (USSD) to the nation.
By eliminating the unscrupulous middle-men Modi has become Robinhood by taking money from these loan sharks who have grown rich on taking advantage of the rural poor and giving it back to the people. India’s mobile phone density with over 870 million subscribers makes mobile telephony a lucrative market in the country. Leveraging this technological boon with the use of banking services, the main features of the PM Jana Dhan yojna include Rs 5,000 overdraft facility for Aadhar-linked accounts, debit card with inbuilt Rs 1 lakh accident insurance cover and minimum monthly remuneration of Rs 5,000 to business correspondents who will provide the last link between the account holders and the bank.
The government’s bench-mark scheme will help boost the confidence of un-banked households (men and women) in India with easy mobile banking for instant transfers etc. The scheme under the Jan Dhan Yojana proposes to pass on the benefits of the Government subsidies directly to the accounts of beneficiaries.
The banking network is set ready to open bank accounts of the uncovered households in both rural and urban areas. In fact, the banking sector is likely to expand and set up additional 50,000 business correspondents, more than 7,000 branches and more than 20,000 new ATMs in the first phase. I also see this as a boost to the rural banking sector in India which has been declining since 1991.
It is a big step by the Indian government which has put in resources and political capital to ensure that cash transfers are headed the right way. It is a service which is likely to empower rural and urban women economically and create great economic stimuli since the savings rate in the rural sector is very high, and most of the savings are usually put under the mattress or invested in gold jewellery. Now they can flow to the banking sector, and in turn, allow the Government to use financial resources for spending on infrastructure.
Your thoughts are welcome.
Sanjay Puri has been working on Indian-American issues and facilitating stronger US-India relations through USINPAC (US India Political Action Committee and AUSIB (Alliance for US India Business), two bipartisan organizations that he chairs.