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    In order to roll out bank accounts for ever Indian and banking services within 5km of every town and village, and all by March 2016-the Finance Minister has urged both public and private sector banks to increase their branch network and bring in efficient services.  This is a part of Prime Minister Narendra Modi’s ambitious financial inclusion plan called Pradhanmantri Jan Dhan Yojana, which he unveiled during his maiden Independence Day speech from the ramparts of Red Fort.

   The finance minister had series of meetings with chiefs of state-run banks in the last two months to discuss the preparedness of banks to roll out the government’s financial inclusion plan and chalk out modern and efficient services.  The government’s financial inclusion plan or Jan Dhan Yojana will provide universal access to banking facilities with a basic bank account with an overdraft facility of 5, 000 and a Rupay-enabled debit and ATM card with inbuilt accident insurance cover of 1 lakh.  The new initiative has been a major success as over 5 crore new Jan Dhan accounts have opened since it was launched in August 2014..

   With a substantial section of society still outside that ambit of the formal financial system, the recent initiative of government which aims to bring the excluded into the banking system over the next few years is laudable.  According to Census 2011, 59% of the 246.7 million households in India have access to banking services; 54% of the 167.8 million rural households in India have access to banking services, and 67% of the 78.9 million urban ones do.  According to Reserve Bank of India estimates, 182 million zero balance accounts had been opened in India up to March 2013, but only 3.95 million of these availed overdraft facilities adding up to  155 crore.
The entire loan portfolio in the Jan Dhan Yojana will be insured against a credit guarantee fund, with an initial corpus of 1, 000 crore, which will provide for defaults on such accounts, it said.  To achieve these objectives, the government is open to public-private partnerships in banks and insurance while it will also tap into the existing national infrastructure of post offices and the future payments banks network.  Moreover, microcredit companies will also compete with each other to increase banking penetration and business correspondents, or agents of banks who reach out to the last mile, will offer simple credit and deposit products to customers.

   To increase the areas of banks and for providing fully enabled bank accounts to the unbanked population, banks will have to ensure that every transaction is part of the core banking solution. Till now, most of these transactions were offline and not connected to the bank’s core banking network. That will also address the issue of inactive accounts. Unlike earlier, the bank accounts will be fully operational from anywhere, be it a bank branch, and ATM or a business correspondent outlet. Transfeer of money directly to beneficiary accounts under the direct benefit transfer scheme will also make sure that the accounts are active. The ministry of finance is looking for new technology solutions to ensure the outreach of financial inclusion programme and expansion of banking areas done with modern software with low cost technology as the current technologies being used have not been able to do that.

   For transferring government subsidies to the beneficiaries, funds will be transferred after a customer’s biometric authentication through the Aadhaar system. To make it lucrative for bankers to open bank accounts and transfer funds from the government to beneficiary accounts, the government is considering paying banks 2% of the transaction amount for every transfer.

In the last three months, the finance minister has urged banks to streamline their existing branch network, expand their credit flow or loans to people for productive usage, helping small and medium enterprises to scale up their operations through bank loan and crack down on willful defaulters of loans, especially the big corporate houses. Banks are also scaling up their technology to reach far flung areas in the country so that people have access to some banking services.

   While the larger impact of widespread financial inclusion will come in time, the actual financial services that are being included in the scheme and the way Finance Minister Arun Jaitiey has asks banks to increase their areas is pertinent.

   Through bank accounts, the needy can borrow money whenever needed from the banking system and escape the clutches of the moneylender. The insurance attached with the Yojana will be handy for customers during any emergency. A real, effective and widespread implementation of the Jan Dhan Yojana will change the way banking is done in India and will help million of unbanked population in the country.

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