Tuesday, December 16, 2014

Jan Dhan Yojana Beneficiaries Face ATM Access Shortage; Cap On Transactions Risks Scheme

As more people are brought under the Pradhan Mantri Jan Dhan Yojana (PMJDY) scheme, their ability to access cash through ATMs remains a conundrum as the deployment of these machines is failing to match the requirement.

Banks and ATM operators worry that low intercharge fee and a cap on the number of free ATM transactions are making the scheme unviable.

A warning was sounded by the CATMi (Confederation of ATM Industry), an association of companies who deploy ATMs for banks, about the risk of high dormancy among accounts opened under PMJDY if enough ATMs were not made available to service the new account holders.

Under the PMJDY, banks have registered 8.83 crore new account holders, issuing 5.85 crore RuPay cards, said BusinessLine.

RuPay is a domestic card scheme facilitating a multilateral system of payments in India, as per RBI's directive.



The newly issued card requires an ecosystem that supports it. New machines see less than 100 transactions a day, against a minimum of 120 required for an ATM operator to break even.

ATM operators and banks point to operating costs involved in keeping a machine running and say that existing interchange fee is not enough to sustain the business model, affecting their ability to install more ATMs.
The April to June quarter for the year saw ATM deployment grow at a measly 1% to the corresponding quarter a year ago.
The total number of ATMs in India stand at 1,67,000 as of June 2014; Point of Sale (PoS) terminals account for 1.08 crore.

ATM unavailability limits Card adoption

Tata Communications Payment Solutions CEO Sanjeev Patel highlighted the tremendous work done in bringing the rural populace under the banking scheme, and added that "not much" had been done to make the card adoption easier.

According to Patel even when card issuance has seen an upswing, the ecosystem necessary to support it is dwindling, with many players choosing to slow down deployment.

A report by Deloitte and CII makes a case for 20,000 new ATMs to be available in the first phase of Narendra Modi government's financial inclusion plan; expected to run from August 15, 2014 to August 14, 2015.

Organized Banking Route at risk

Many Indian banks, state-owned and private, have capped the number of free transactions per month. However, a few banks insist that account holders who manage to maintain a good balance would be eligible for a charge waive-off.


Experts express fear that the added cost of transaction on the small value amount could drive people away from the organized banking route, defeating the very purpose of the scheme.

People with less or no balance, are the ones who need financial inclusion more than others; and it is this particular sub-set, inclusive of the urban poor, who will always need less money to withdraw, says Tata's Patel.

ICRA's co-head Financial Sector Ratings, Vibha Batra, pointed to the proliferation of ATMs in dense urban centres, where the number of transactions per ATM were lower and also per account deposits in rural areas average around Rs. 3,000 to 5,000,  and the number of transactions per ATMs was less and of low value.

The new banks to come up – IDFC and Bandhan Financial Services, could, however, change the financial landscape. The upcoming small banks will require adequate cash transfer and payment infrastructure mechanism to be in place in the next 2-3 years, creating an alternate channel of banking services.

Life insurance cover under Jan Dhan comes with riders

Bus

Keen to push through its financial inclusion plan, the government has finalised the life insurance cover to be provided under the Pradhan Mantri Jan Dhan Yojana. But unlike expectations, the cover has several riders, meaning that not all those who have opened an account under the scheme would be eligible for life insurance.

For starters, the Rs 30,000 life insurance cover would be limited to just one account holder per family. “The person should normally be the head of the family or an earning member of the family and should be in the age group of 18 to 59,” the guidelines state.

While the beneficiary will have to mandatorily exit the life insurance scheme at the age of 60 years, the cover is at present available only for a period of five years till 2019-20, after which it will be reviewed.

In addition, the eligibility criteria state that life insurance would be available only to those people opening a bank account for the first time between August 15, 2014 and January 26, 2015.

Further, the person must have a valid RuPay Card and biometric Card linked to the bank account or in the process of being linked to the bank account.

The Centre has also excluded various categories of people from the scheme, including Central and state government employees, people whose income is taxable under the Income Tax Act, 1961 or TDS is being deducted from the income, and their families.

“Persons who are included in the Aam Aadmi Bima Yojana covering 48 occupations defined under the Scheme, and their families” have also been excluded. Further, other eligible account holders who have life cover on account of any other scheme of the Bank against the account will have to choose between the two life covers.

Prime Minister Narendra Modi had launched the scheme on August 28, this year with the intent of financially empowering the people by opening bank accounts for two persons in every household.
Additionally, they are to be given a RuPay debit card, accidental insurance cover of Rs 1 lakh and an overdraft facility.

The government has targeted 7.5 crore households under the scheme. At present, 9.04 crore accounts have been opened with total deposits of Rs 7,006 crore. However, 6.68 crore accounts continue to be dormant.  Life Insurance Corporation of India is responsible for the life insurance cover through a special fund for the purpose which has an initial corpus of Rs 100 crore from the Social Security Fund.

Eligibility criteria
* Insurance would be available only to those people opening a bank account for the first time between August 15, 2014 and January 26, 2015.

* While the beneficiary will have to mandatorily exit the scheme at the age of 60 years, the cover is at present available only for five years till 2019-20 after which it will be reviewed.

Moving towards full financial inclusion

The President of India, Shri Pranab Mukherjee inaugurated today (December 11, 2014) a Financial Literacy Centre and a Financial Library at Dr. Rajendra Prasad Sarvodaya Vidyalaya in the Presidents Estate. A Financial Awareness Festival was also held in which students of Dr. Rajendra Prasad Sarvodaya Vidyalaya as well as residents of the Presidents Estate were trained in financial literacy using a model bank branch of the State Bank of India. NPCI through RuPay Cards gave Rs. 25/- credit to each student to buy books, educating them thereby about card transactions. Financial games, quizzes and other activities were also organized for students, children and parents.

The Rashtrapati Bhavan launched a campaign for turning the Presidents Estate into a financially inclusive township (FIT) on September 27, 2014.

The campaign included:-

A financial literacy programme.

Enrolling all residents in UIDAIs Aadhar scheme.

Opening of Saving Bank Accounts for the unbanked under the Pradhanmantri Jan Dhan Yojana.

Enrolment of people in Swavalamban, - a special scheme of the Pension Fund Regulatory and Development Authority for those belonging to the unorganized sector.

Issue of RuPay Cards to new as well as existing account holders of the United Bank of India within the Estate.

To develop a comprehensive strategy, an action plan was developed in association with representatives of United Bank of India, State Bank of India, National Payment Corporation of India,Pension Fund Regulatory and Development Authority, UIDAI etc. Financial literacy-cum-inclusion camps for residents of the Estate were organized on September 27-28, 2014 and December 7-9, 2014to enrol residents of the Presidents Estate in various schemes.Special attention was given to senior citizens, women, special children, domestic help and contractual workers.

Subsequent to the camp held in September 2014, the United Bank of India carried out a comprehensive survey through door-to-door mapping to ensure that there are no households left without any bank account. Domestic help and contractual workers not covered under any health scheme were also provided benefits under the Delhi Governments Arogya Yojana.

The pilot project to make Presidents Estate an FIT has been undertaken to establish a model of convergence in government programmes and services and ensure that benefits of various schemes accrue to all residents of the Presidents Estate, who number around 5000 persons.

Sunday, December 7, 2014

Finance Ministry asks banks for early issuance of RuPay card under Pradhan Mantri Jan Dhan Yojana

The Finance Ministry has asked banks to expedite issuance of RuPay debit card under Pradhan Mantri Jan Dhan Yojana (PYMJDY).


The Finance Ministry has asked banks to expedite issuance of RuPay debit card under Pradhan Mantri Jan Dhan Yojana.

"Banks were asked for early issuance of pass books and RuPay Debit Cards to customers and organise one month as 'RuPay card activation Month' to increase activation of RuPay card," an official statement said.

In a review meeting of PMJDY held recently, all the banks have been advised to cover the gap including of their Regional Rural Banksby December 15.

As per status presented in the meeting, banks have opened 8.39 crore accounts under PMJDY and have issued 5.32 crore RuPay cards leaving a gap of 3.07 crore.

It was discussed that Aadhaar numbers have been seeded in 30 per cent of account opened under PMJDY, it said.

Banks were asked to aware the customers for Aadhaar seeding and to use various channels including SMS, internet Banking and ATMs for seeding of Aadhaar numbers, it added.

The meeting chaired by Anurag Jain, Joint Secretary (FI), Department of Financial Services, Ministry of Finance banks were asked to make efforts in area of financial literacy in coordination with various agencies and existing Financial Literacy Centers to spread awareness on PMJDY and use of RuPay cards etc.

Executive directors of the banks who participated in the meeting were also asked to arrange for sensitising of their staff members and training for Bank Mitras among others.

During the review, special focus was given on completion of household survey work and coverage of all uncovered households. It was informed that 97 per cent survey work has been completed.

It is found that out of 20.28 crore households, 17.28 crore households have been covered including persons already having bank accounts.
 It was decided that strategy should be framed in such a manner so as to cover remaining uncovered 3 crore households by December 26.

Thereafter the same should be duly publicised through local media that all uncovered households as per survey have been covered and public feedback should be obtained for information about uncovered households, if any, it said.

"For this purpose, information may be given by a person who doesn't have bank account himself or anybody having this knowledge by contacting toll free numbers," it said.

"This process should be carried-out in close supervision and coordination of local district administration. Complete saturation of uncovered Households should be achieved by January 26, 2015," it added.

The Finance Ministry has asked banks to expedite issuance of RuPay debit card under Pradhan Mantri Jan Dhan Yojana (PYMJDY).

"Banks were asked for early issuance of pass books and RuPay Debit Cards to customers and organise one month as 'RuPay card activation Month' to increase activation of RuPay card," an official statement said.

In a review meeting of PMJDY held recently, all the banks have been advised to cover the gap including of their Regional Rural Banks ..

Read more at:
http://economictimes.indiatimes.com/articleshow/45387629.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
The Finance Ministry has asked banks to expedite issuance of RuPay debit card under Pradhan Mantri Jan Dhan Yojana (PYMJDY).

"Banks were asked for early issuance of pass books and RuPay Debit Cards to customers and organise one month as 'RuPay card activation Month' to increase activation of RuPay card," an official statement said.

In a review meeting of PMJDY held recently, all the banks have been advised to cover the gap including of their Regional Rural Banks ..

Banking on rural deposits


The Jan Dhan Scheme has by far been the quickest and most expansive financial inclusion drive launched in the country. It was launched with a set target for the existing banks. The results are quite amazing and actually provide some guidance to the new players entering the market as ‘payments’ or ‘small’ banks.

So far, 81.2 million accounts have been opened of which 60% are in rural areas. Banks, primarily public sector banks (PSBs), have issued 51.1 million RuPay cards for these accounts. Deposits in these accounts were R6,355 crore as of November 26. Interestingly, there were 60.7 million zero-balance accounts, which implies an average of R3,100 in the non-zero accounts. This scheme has been aggressively implemented and the focus was more on opening accounts with minimum KYC norms to expedite the process. The idea is laudable as it is a quick way of accomplishing a task. But the high zero-balance accounts, as well as low balances on an average, actually signal that these households typically do not have the money to keep as deposits or are sceptical of the same. Alternatively, they may not really be interested in such deposits, notwithstanding the add-ons of a debit card as well as possible future credit and insurance going forward.

Therefore, RBI’s decision to start issuing licences to payments banks that will take savings bank deposits and invest only in government securities for a 1-year duration or less and, to a certain extent, in other bank deposits, will pose a challenge to the licensees as they will have to create a superstructure to keep their business going. All options are open and telecom companies and other card-based companies can tie their businesses with bank accounts and probably be more successful than banks as there is already an existing business relationship with the customer. The question is will these households actually keep the deposits with these banks or not?

Post offices qualify for such a licence and are well poised to leverage this market. They would only have to scale up and not really have to start afresh like the supermarkets or telecom companies. Their deployment of funds too would change—passing it on to the Centre and states; they will have to deploy all in short-term paper. Their operations too have to be altered unless a new Post Office savings bank is opened in the same premises, as there are other products being offered which can no longer be done—postage, fixed and recurring deposits, and small savings (including the Kisan Vikas Patra). Regulation does not permit the same and, hence, a new bank may be created for this purpose. However, for an completely new entrant, the establishment costs would be considerable.

The model, for any entrepreneur, makes a lot of sense as the bank will get deposits at 4% or free (current accounts) and can earn a good 7-8% return. Operational costs will be low at 1-2%, and hence a return of 1-2% can be maintained without any encumbrance of NPAs or capital as these variables will become irrelevant given the business model. However, if fresh infrastructure is to be created then there would be high overheads.

The small bank concept is, of course, more challenging as 75% of the funds have to go to priority sector lending, to the farm sector and the SMEs, with a cap of R25 lakh for 50% of the loans. This will be on top of the CRR and SLR requirements. Intuitively, it can be seen that the cost of servicing these small-sized loans would be high for these banks which will also have to open up brick-and-mortar branches, unlike the payments banks.

Additionally, both these segments are vulnerable. When the monsoon fails, the farm loans go bad and the cycle of monsoon failures has been moving with shorter amplitudes. Further, the economic cycle too has become more unpredictable and, often, a sustained industrial slowdown results in higher NPAs being generated as they get affected almost immediately when the economy slows down. This being the case, the pressure on quality would be high. This will also pressurise their capital and hence will be onerous, unlike it is for commercial banks where the portfolio is well spread across all sectors, smoothening the risks .

MFIs and NBFCs can apply here and it will be interesting to see if they are attractive to these players. This will hold for MFIs who would get access to deposits in a formal manner and can lend to these segments where there is a modicum of familiarity. NBFCs, too, may be inclined to consider this option given that the regulatory structure has become a little more intense for them in their normal line of business.

The crux of these banks working well would depend on their ability to garner deposits in the rural areas in particular. The Jan Dhan Yojana warns that it may be difficult to get the deposits, though opening accounts would be easy. It will require a lot of awareness. Counter-intuitively, if the Jan Dhan programme that offers the promise of credit and insurance has not caught on, would a plain vanilla deposit be convincing to the household. This is where the payments bank should work and linking one’s own product to the deposit could be a good way of making a start.

Jan Dhan scheme rush: Banks run short of passbooks

Beneficiaries of the Centre-sponsored Jan Dhan scheme are yet to receive their passbooks even after opening accounts two months ago as banks are facing a severe shortage of booklets.

According to a data provided by Syndicate Bank— the lead bank for the project in Meerut circle—over 1.75 lakh accounts have been opened under this scheme in Meerut. District manager of the lead bank, BD Pandey, said, "About 70% new account holders have been given the passbooks but the accounts are opened in such huge numbers in all the banks that it is not possible to provide passbooks to all the costumers. The crisis is not just in Meerut, but prevails in entire state. All the banks are sending their demands to concerned head offices but it will take some time to fulfil the demand."

The situation in Baghpat district is worst. Here, over 36,000 accounts have been opened under the scheme but only 40% costumers got their passbooks. A number of costumers did not even get their account numbers. A resident of Brahamanputthi village in Baghpat, Sonam, said, "I have been visiting the bank for last two months continuously but neither had I got my account number nor the passbook. Every time bank officers tell me that account number will be given with the passbook."

Amidst such situations, the residents are worried over the fact that how they would deposit their savings without having a bank account number and enjoy the benefits of the 'Jan Dhan scheme.'

Pradhan Mantri Jan Dhan Yojana is a scheme for comprehensive financial inclusion launched by Prime Minister, Narendra Modi on 28 August 2014. He had announced this scheme on his first Independence Day speech on 15 August 2014. Under this scheme, account holders will be provided zero-balance bank account with RuPay debit card, in addition to accidental insurance cover of Rs 1 lakh. Those who open accounts by January 20, 2015 over and above the 1 lakh accident cover, they will be given life insurance cover of Rs 30,000.

A multi-wallet solution to aid NSDC’s mission

A multi-wallet solution to aid NSDC’s mission

Ever since its launch in 2010, the National Skill Development Corporation (NSDC), a not-for-profit public-private partnership, has been trying to re-skill young people with the help of training partners from key industrial sectors such as retail, manufacturing and automobiles in order to make them more employable. It successfully trained 1 million youths aged between 16 and 25 years last year and aims to take the number up to 3.3 million by the end of 2014. In return for training the youths, the training partners take a nominal fee—paid for by trainees from a reward amount they earn from NSDC for completing the training under the Standard Training Assessment & Reward (STAR) scheme, in partnership with the Bank of India. However, problems arose when training partners complained they had not received payments on time—and sometimes not at all. With the incentive to train drying up, NSDC had to quickly find a solution. The solution came in the form of a multi-wallet prepaid payment solution—India’s first— run by TranServ Pvt Ltd, a three-year-old electronic prepaid payments company in association with the Bank of India. This not only ensured that NSDC’s training partners got paid on time, but also helped the youths take charge of their own finances. The multi-wallet solution for NSDC was launched by TransServ’s chief operating officer Aditya Gupta and his team: co-founders Anish Williams who is also chief executive officer; Sandeep Ghule, chief marketing officer; Amar Habibullah, business head for Lucknow region; and Anand Kapadia who heads sales and distribution. The platform, which falls under the firm’s Shmart! flagship brand, was developed in-house by TranServ and was already being used by corporate clients. It was customized within 15-20 days for NSDC and launched on 5 February by then finance minister P. Chidambaram.

Read more at: http://www.livemint.com/Companies/DwUs65IIJYzP9Rr1dpcRvO/A-multiwallet-solution-to-aid-NSDCs-mission.html?utm_source=copy
 Ever since its launch in 2010, the National Skill Development Corporation (NSDC), a not-for-profit public-private partnership, has been trying to re-skill young people with the help of training partners from key industrial sectors such as retail, manufacturing and automobiles in order to make them more employable. It successfully trained 1 million youths aged between 16 and 25 years last year and aims to take the number up to 3.3 million by the end of 2014. In return for training the youths, the training partners take a nominal fee—paid for by trainees from a reward amount they earn from NSDC for completing the training under the Standard Training Assessment & Reward (STAR) scheme, in partnership with the Bank of India.

However, problems arose when training partners complained they had not received payments on time—and sometimes not at all. With the incentive to train drying up, NSDC had to quickly find a solution. The solution came in the form of a multi-wallet prepaid payment solution—India’s first— run by TranServ Pvt Ltd, a three-year-old electronic prepaid payments company in association with the Bank of India. This not only ensured that NSDC’s training partners got paid on time, but also helped the youths take charge of their own finances.

The multi-wallet solution for NSDC was launched by TransServ’s chief operating officer Aditya Gupta and his team: co-founders Anish Williams who is also chief executive officer; Sandeep Ghule, chief marketing officer; Amar Habibullah, business head for Lucknow region; and Anand Kapadia who heads sales and distribution.

The platform, which falls under the firm’s Shmart! flagship brand, was developed in-house by TranServ and was already being used by corporate clients. It was customized within 15-20 days for NSDC and launched on 5 February by then finance minister P. Chidambaram.

Under the multi-wallet solution, TranServ opens two wallets for trainees: one for payment to the training partners, which is not accessible to the trainee, and the other a general savings wallet. The fee for the training partners is automatically deducted from the token sum that the youths are paid every month.

The second wallet is linked to the Bank of India account, and gives the trainee a debit card which can be used at ATMs and points of sale, and also allows them account holder privileges so they can check the balance on phone, enquire about the last few transactions, report loss of card, ask for a statement or new ATM PIN, etc. Alternatively, card holders can check the balance from usage alerts that are sent to their mobile phones after each transaction. The card is issued for two years with the option to have it renewed. Bank of India pays TranServ a fee for this service.

Since March, when the multi-wallet solution was implemented, five lakh students have been enrolled for this solution by NSDC across 26 states. Further, 6,500 business correspondents have been facilitating this programme, with 3,000 applications received per day, making it the largest multi-wallet project in the country. Through this solution, TranServ has helped its 300 training partners recover Rs.200 crore from the total amount of Rs.400 crore due to them, which they are expected to receive by year-end. To ensure security and compliance with the process, TranServ’s multi-wallet solution has been reviewed by four banks: Bank of India, Kotak Mahindra, Ratnakar Bank Ltd and Axis Bank. Besides Bank of India, VISA is also TranServ’s partner for the solution. The so-called ‘benefit disbursement programme’ was chosen as a finalist in Emerging Payments Awards, UK, under the category of the best global government prepaid programme.

The award was created in 2008 to recognize significant and commercial achievements in the prepaid sector. TranServ was also awarded the Aadhaar Governance Award instituted by the Unique Identification Authority of India (UIDAI) in 2012 for its work in large scale financial inclusion and direct benefits transfer (DBT) programmes, enabling real-time transactions through VISA and RuPay, which could also be authenticated by Aadhaar. According to a Reserve Bank of India report in April, only 10-15% of the 369 million debit and credit cards in the company are used for online transactions.

TranServ’s Aditya Gupta believes such multi-wallet solutions could help greatly in increasing the awareness and ease of use of online transactions. Besides, this solution also helps in the government’s plans for financial inclusion by empowering millions of youths to take charge of their own finances, with their own bank accounts, said Gupta.

NSDC hopes to re-skill 500 million youths by 2022. Gupta feels confident that TranServ, with the help of its multi-wallet solution, will be a key finance enabler towards this end, as it prepares for the second phase of the NSDC re-skilling programme due to start shortly.