Monday, December 29, 2014

RuPay debit cards could be the Jan Dhan Yojana’s undoing


The lack of formal banking and cash is one of the toughest constraints in the rural areas of India. The Jan Dhan Yojana might be the best strategy to overcome this. But this ambitious scheme has one critical flaw that could ruin it and result in its failure to deliver on promises: the RuPay debit card. To ensure the success of the yojana, it is essential that the RuPay debit card plan be shelved, because it poses a huge reputation risk — the failure of the card could have damaging consequences for the scheme as a whole.

For families which have been offered bank accounts under the scheme, the advantages of a cash-based economy are just a step away. Except in the case of the lowest deciles, poor families do have some assets but, in the absence of a ready market for them, they are forced to make distress sales for even routine transactions. Having cash in the bank and, more importantly, a way to easily deposit and withdraw money, will be a force-changer for these families once the banking habit spreads.

The weakness in the system comes from the introduction of the debit card. It introduces the risk of a third party meddling with the savings bank deposits of crores of first-time account users. Earlier government programmes have become non-starters for similar reasons. But before going into this in detail, just imagine the landscape the debit card would create for new bank account holders. Recollect the tense times we went through when we first got cards — debit or credit. Recollect those tentative moments eons ago, when we operated an ATM machine for the first time.

In lakhs of villages across India, instead of offering frugal banking, we are trying to replicate these experiences. The debit card has to be preserved, kept reasonably dust free and intact for its magnetic strip to operate. Though the account won’t be frozen if the card is not used, the accident insurance cover gets cancelled if it is inactive for 45 days.

But this isn’t the chief obstacle. Repeated observations of auditors and independent studies about previous government schemes throw up two concerns. First, there is always one stage or point at which the beneficiary has to approach the district administration or the bank to get into the scheme. This is the point at which money could leak out of the scheme. The second concern is complication. The RBI list of frequently asked questions on the Jan Dhan Yojana, sent to all banks, acknowledges this — the “branch manager will have to advise all the related risks to the illiterate account-holder at the time of issuance of RuPay card”. The RuPay debit card is in line to be the leakage point from the scheme. It has the weakness of being complex and requiring a third party to administer.

The results could be devastating. Remember, for instance, in the Integrated Rural Development Programme, the loan scheme had two components: a subsidy provided by the government and a loan given by the bank. People may recall the standing instructions issued by bank headquarters to hand over the subsidy to the district or zila parishad representative but not to disburse the loan. The recipient got some money, the officials took a cut, and there was no pressure to repay a loan.

The Jan Dhan overdraft could meet the same fate, of being parcelled out, with the account holder getting the smallest share. To reduce the hassle and risk of keeping the card with themselves, a sizeable percentage of people, typically the weakest, might give it to someone else for safekeeping — a village leader or the bank manager. This is a real risk. The account holder knows if she does not put more money in the bank, she is safe from further loss, so, she will keep her account dry. Yet the safekeepers could purloin the account holder’s share of government subsidy.

The RuPay debit card’s problem is that it is a physical object and, like any government property, lends itself to widespread misuse. A far better option would have been a frugal banking plan based solely on a single-number platform like Aadhaar, with biometric identification, or a telecom number-based identification platform like M-Pesa for the Jan Dhan account holders to remember and use. Every benefit could have been credited to this account.

The debit card adds nothing to the experience of operating a bank account for the new entrant but has all the elements necessary to wreck it.

Monday, December 22, 2014

Account balance a necessity for Jan Dhan: SS Mundra

Jan Dhan yojana: No fresh a/c needed to get benefits of scheme 







 

RBI deputy governor SS Mundra defends the scheme as a great start and says the government's direct benefit transfers will see more accounts getting used.

Banks have surpassed the Jan Dhan target of 7.5 crore accounts amid current tally standing at 9 crore new accounts. However, frantic target chasing has meant probably 30 percent of accounts are for already banked customers. Effectively, only 40 percent are operational with some money in the account, making no sense giving mandatory RuPay cards.

RBI deputy governor SS Mundra defends the scheme as a great start and says the government's direct benefit transfers will see more accounts getting used. Mundra says, “There was an operational lag initially between opening accounts and issuing of RuPay cards, but that takes time. Of late, gap has narrowed but the necessary ingredient is balance in the accounts.”

In the race to reach their targets, banks have opened accounts for some who already have accounts. Sometimes customers have beguiled bankers hoping to claim the insurance benefits that come with the new account.





“Yes, there were cases where people believed only new account would give entitlement to benefits. I can't give exact no of duplicate accounts but some surveys done show 30 percent duplicity. Disregarding the same, residual figure is still near original target”, he adds.

While duplicate accounts are not illegal, the bigger problem is that new accounts make sense only if some money is saved or spent. Mundra, like many bankers maintains that any serious usage of the new accounts will only take effect when government’s transfer benefits like food and fertiliser subsidy pass through them.

Mundra took over as Deputy Governor of the Reserve Bank of India, in charge of banking supervision and financial inclusion at a time when the new government had just lifted financial inclusion to mission mode with its Jan Dhan Yojana.

Inclusion has always been the central bank’s stated goal and an area of expertise for Mundra. He was the chairman of the committee on financial inclusion set up by the Indian Banks Association as also of the Nachiket Mor Committee on Comprehensive Financial Services for Small business and low income households.

As former chairman of Bank of Baroda and a career banker for 37 years, Mundra is also best endowed for supervising banks as a regulator at a time when loan defaults are running high.

Below is verbatim transcript of the interview:

Q: Jan Dhan is now almost six months old. Are we getting very close to the targets?

A: If we are talking in terms of figures then targets are already behind. If you recollect when Jan Dhan had started it had aimed at opening 7.5 crore or 75 million accounts. The last tally is almost 9 crore, so 90 million accounts have already open. So in terms of number of accounts to be opened certainly that milestone has been reached.

Jan Dhan was not only about opening the account and that is where the Reserve bank had been expressing all those things that opening of account is just the first step. It is very crucial that the accounts are operational and they bring certain desirable outcomes and larger outcome would be to inculcate a saving and investment habit in the people who are coming to the formal banking sector for the first time. But there is no denying the fact that for doing all that you have to have an account and that has been done.

Now it is also crucial to do some more steps. So the linking of this account with Aadhaar, the DBT should start flowing, the people themselves would start saving, but I am happy to see, when I look at the latest figure and I understand that now these accounts, though more than 60 percent of them are still not operational, but the account that are operational have already accumulated a saving of around Rs 7,000 crore, as per the latest data available. So, that is heartening, but as I said a number of things are yet to be done.

 Q: Are operational accounts using RuPay card, how many of them are operational?

A: No, again we are getting too impatient about it. Opening the account itself and that is going on in mission mode. Initially, for obvious reasons there was a substantial lag between the opening of account and issuance of RuPay card. Issuance of RuPay card involved some more logistics, which takes its own time.

Q: It gets posted.

A: Yes, But of late the gap has narrowed. So, now we say that accounts opened are around 9 crore, maybe the RuPay card has been issues in 6 crore plus account. Now everything is interlinked. You don’t use a RuPay card on zero balance account. So, the necessary ingredient is that there has to be a balance in the account and moreover the issuance of RuPay card is one thing, then educating the people to use those cards. Let us be mindful of the fact that a number of people who are coming in this maybe a first time user of banking services.

7 things to know about Pradhan Mantri Jan Dhan Yojana

7 things to know about Pradhan Mantri Jan Dhan Yojana
 

New Delhi: On 15th August 2014, Prime Minister Narendra Modi, from the historic Red Fort, had announced the launch of Pradhan Mantri Jan Dhan Yojana (PMJDY). The primary aim of this scheme is to provide poor people access to bank accounts. However, the account comes with some benefits as well.

India TV brings you seven must-know points about PMJDY:

1. The scheme covers both urban and rural areas of India. All bank accounts will be linked to a debit card which would be issued under the Ru-Pay scheme.  Rupay is India’s own unique domestic card network owned by National Payments Corporation of India and has been created as an alternative to Visa and Mastercard.

2. Under this scheme, every individual who opens a bank account becomes eligible to receive an accident insurance cover of up-to Rs 1 Lakh for his entire family.




3. A person who is already having a bank account with any bank need not open a separate account under PMJDY. He/she will just have to get issued a RuPay Card in his existing account to get benefit of accidental insurance. Over-draft facility can be extended in the existing account if it is being operated satisfactorily.

4. Accidental Insurance coverage under PMJDY: Accidental insurance of Rs 1 lakh is available to all RuPay card holders in the age group of 18-70 where RuPay card needs to be used once in 45 days of receipt. Claim intimation should be given to his or her bank where account is maintained within 30 days from the date of accident.

5. Life Insurance coverage under PMJDY. Only one person in the family will be covered and in case of the person having multiple cards/accounts, the benefit will be allowed only under one card i.e. one person per family will get a single cover of Rs 30,000. The claim of Rs 30,000/- is payable to the nominee(s) of account holder who need to submit necessary documents to the Nodal Branch of the concerned  Bank. Government employees (serving/retired) and their families, persons filing Income Tax Return/TDS deductees and persons covered under the Aam Adami Bima Yojana, are ineligible for Life insurance under PMJDY.



6. Once the bank account has been active for 6 months and linked to Aadhar card, the person would become eligible for an overdraft of up to Rs 2,500 which would further be enhanced by the bank to Rs 5000 over time.

7. The scheme also provides incentives to business and banking correspondents who serve as link for the last mile between savings account holders and the bank by fixing a minimum monthly remuneration of Rs 5000.

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.

Sunday, November 16, 2014

FinMin review meeting with chiefs of PSU banks, FIs on Nov 20

FinMin review meeting with chiefs of PSU banks, FIs on Nov 20
The Finance Ministry has called a meeting of chiefs of public sector banks on November 20 to review their financial performance and Jan Dhan Yojana, among other things.

Chief executives of financial institutions like Nabard and NHB are also attending the meeting.
"Finance Minister Arun Jaitley may attend the meeting. If the Minister is unable to, Department of Financial Services Secretary Hasmukh Adhia will head the review meeting," a source said.

The main agenda of the meeting is discussing financial performance at the end of the second quarter, sources said.

The progress of Pradhan Mantri Jan Dhan Yojana (PMJDY) is another important issue that will be discussed in the meeting.

The issue of asset quality and recovery of bad loans would also be discussed. Credit to farm sector, MSME, housing and education loans may also come up talks, sources said.

Besides, there would be deliberation on lending to stalled projects.

The Prime Minister on August 28 launched the the PMJDY scheme to boost financial inclusion. About 7 crore bank accounts have been opened under Jan Dhan scheme so far.

As on November 10, 7.24 crore accounts have been opened under Pradhan Mantri Jan Dhan Yojana (PMJDY) of which 4.29 crore in rural and 2.95 crore are in urban areas. RuPay Cards have been issued in case of 3.97 crore accounts.

The Yojana envisages universal access to banking facilities with at least one basic banking account for every household, financial literacy, access to credit, insurance and pension facility.

The main features of the PMJDY scheme include Rs 5,000 overdraft facility for Aadhar-linked accounts, RuPay Debit Card with inbuilt Rs 1 lakh accident insurance cover.

Besides, account holders under the scheme will get life insurance cover of Rs 30,000. This was additional benefit announced by the Prime Minister during the launch of the scheme.

Under the scheme, the account holders will get an overdraft facility of Rs 5,000.

Blistering pace: 6.5 crore bank accounts opened so far under Jan Dhan scheme


Banks, especially public sector and regional rural banks, are going all out to open accounts for individuals from low-income segments.

Under the Prime Minister Jan-Dhan Yojana (PMJDY), which was launched on August 28, banks collectively opened a whopping 6.51 crore basic savings bank deposit accounts (BSBDA) in just two months. 

Going by the blistering pace at which banks are opening accounts, in all probability, they will surpass the target of reaching 7.5 crore un-banked families by January 26, 2015.

Of the 6.51 crore new accounts that have been opened so far, 4.95 crore are with zero balance, as per data submitted by banks to the Finance Ministry. 

Banks mobilised deposits aggregating ₹4,857 crore from the remaining 1.56 crore new accounts. What this means is that new customers, on average, deposited ₹3,113 per account. 

Public sector banks and regional rural banks accounted for 81 per cent and 16 per cent, respectively, of the total accounts opened under PMJDY. The response of private sector banks to the Yojana has been lukewarm.

While banks went all out to open the accounts, they could not issue “RuPay” debit cards to almost half of the new customers.

RuPay cards

“With banks aggressively taking up the task of opening accounts under the PMJDY, supply of RuPay cards lagged demand. However, steps have been taken to augment the supply of cards.

“By December 15, all customers who opened accounts under the PMJDY will receive the cards,” said a senior public sector bank official. PMJDY is a National Mission for Financial Inclusion. It seeks to ensure access to financial services, namely, banking/savings and deposit accounts, remittance, credit, insurance and pension in an affordable manner.

RuPay debit card is the home-grown card payment scheme launched by the National Payments Corporation of India to rival global payment processing giants Visa and MasterCard.

Under PMJDY, the debit cards comes with ₹1 lakh accident insurance cover, and an additional ₹30,000 life insurance cover for those opening bank accounts before January 26, 2015.
The performance of the BSBDA is monitored and overdraft facility of up to ₹5,000 is given in a phased manner. 

To remain eligible for the ₹1 lakh accident insurance cover that comes with the BSBDA, the RuPay cards have to be used at least once in 45 days.

At a recent meeting, Finance Ministry mandarins told top bankers that mere issuance of cards will not suffice.
The cards have to be activated at the earliest and made operational.

Monday, November 10, 2014

5 crore Jan Dhan accounts outside Rs 1 lakh accident insurance ambit

5 crore Jan Dhan accounts outside Rs 1 lakh accident insurance ambit

Five crore of the seven crore bank accounts opened under the government's flagship financial inclusion programme, Pradhan Mantri Jan Dhan Yojana (PMJDY), have fallen outside the ambit of the in-built Rs 1 lakh accident insurance cover as these accounts have seen no transaction since they were opened.

Bankers and insurance industry executives say rules require at least one transaction in the account in the preceding 45 days for an account holder to be eligible for the insurance cover. But of the seven crore accounts opened under the scheme, only 1.71 crore accounts have seen transactions while the rest have had zero balance since they were opened, which means there have been no transactions in these accounts.

PMJDY, which was launched by Prime Minister Narendra Modi on August 28, seeks to cover 7.5 crore un-banked households in the country in the first phase. It provides Rs 5,000 overdraft facility for Aadhar-linked accounts and RuPay debit card, besides a Rs 1 lakh accident insurance cover "If an account holder meets with an accident during the 45 days when there has been no transaction in his account, he is not entitled to the insurance cover," said a senior executive with state-run Vijaya Bank who is involved in implementing PMJDY.

5 crore Jan Dhan accounts outside Rs 1 lakh accident insurance ambit

The executive said most of the account holders seem unaware of the '45-day clause'. "We are trying to explain it to them," he said. National Payment Corporation of India (NPCI), which has an agreement with private sector HDFC Ergo to provide this insurance cover, is of the view that the accident insurance should not be looked as a plain vanilla welfare measure. "These are initial days of the scheme and there is no need to get disheartened," said AP Hota, managing director and CEO of NPCI."Most of these accounts will be soon linked with various direct benefit transfer schemes and then there will be regular transactions."

The government is all set to launch a modified direct benefit transfer for liquefied petroleum gas (LPG) on a pilot basis in 54 districts across the country. Under the scheme, LPG consumers will be able to get subsidy directly in their bank accounts even if they do not have Aadhaar numbers.

So far, under PMJDY around 32% accounts have been seeded with Aadhaar and around 4 crore have been issued the Rupay debit card.The prime minister had earlier said that a lot of effort will be required in promoting financial literacy among the new account holders. "New accounts also need to be kept alive and properly utilised.

Aadhaar numbers will need to be seeded in bank accounts," he had said.Towards this end, the finance ministry is working on to increase the reach of banks through various models, including banking correspondents to facilitate banking facilities.
Five crore of the seven crore bank accounts opened under the government's flagship financial inclusion programme, Pradhan Mantri Jan Dhan Yojana (PMJDY), have fallen outside the ambit of the in-built Rs 1 lakh accident insurance cover as these accounts have seen no transaction since they were opened.

Bankers and insurance industry executives say rules require at least one transaction in the account in the preceding 45 days for an account holder to be eligible for the insurance cover. B ..

Jan Dhan balance tops Rs 5,000 crore mark, nearly 7 crore accounts opened

 

The Pradhan Mantri Jan Dhan Yojana has so far managed to bring over Rs 5,000 crore into the formal banking system, as close to seven crore account holders have started depositing cash into their bank accounts. A large part of this money was hitherto kept at home, with little or no productive use.

Latest data collated by the finance ministry showed that on November 3, 6.98 crore bank accounts had been opened across the country, with Rs 5,300 crore parked in them. Just a tad under 4 crore RuPay cards had been issued to these account holders, with the remaining expected to get the ATM card over the next few weeks, officials said.

At the current pace, it's a matter of days before bank employees help the government scale the target of opening 7.5 crore bank accounts under the financial inclusion scheme launched on August 29. The government was looking to achieve the target before January 26, 2015, well ahead of the earlier schedule of August 15, 2015. But with the target within reach, the finance ministry is now looking at doubling the target to open 15 crore accounts, said an official.

While banks have been ahead of the curve in opening bank accounts, the run rate for deposit accumulation has started picking up now. At current levels, each Jan Dhan account has a balance of around Rs 750. Initially, the average balance in each account was around Rs 500.

Historically financial inclusion accounts have been low value accounts for public sector banks with balances of less than Rs 1,000. For banks, experts said, the challenge is to ensure that the accounts remain active and account holders keep depositing funds as low account balance have in the past deterred bankers from pushing financial inclusion.

This time, however, the government is hoping that cash transfer into the accounts will ensure that transactions take place and sufficient balance is maintained. With the finance ministry also proposing overdraft facility based on the financial history of an account holders, there is an added attraction to maintain a healthy balance.

A recent report by Boston Consulting Group, Ficci and the Indian Banks' Association had pointed out that among the 16 crore no-frills accounts opened before Jan Dhan's launch, only a quarter had a single transaction last year. Similarly, a quarter actually had a balance. "In effect, five years of effort has led to about 20% addition to active savings bank accounts in the nation," said the report, released in September.


Chandra Shekhar Ghosh, CMD of micro finance institution Bandhan Financial Services, which recently got RBI permission to set up a bank network, told TOI on Tuesday that the challenge for banks is to deliver services at the doorstep. "The Jan Dhan Yojana is a very good initiative to open the accounts but how banks design the products and services and bring it to the doorstep that is the issue. You need to inculcate the habit of banking with those customers," he said.

Three-fourths of Jan-Dhan accounts hold zero deposits

Even as banks race to open up accounts under the Pradhan Mantri Jan-Dhan Yojana, only a quarter of the accounts opened till date have any cash deposited in them.

Official data reveals that of the 6.99 crore bank accounts opened till November 4, 75 per cent or 5.29 crore accounts have zero balance. The data also reveals that it is two non-BJP states — Uttar Pradesh and West Bengal — where the maximum number of bank accounts have been opened under the scheme.

However, 1.69 crore accounts under the scheme have managed to bring in Rs 5,294.10 crore of household savings into the formal banking channels. Back of the envelope calculations show that on an average each of the accounts have deposited Rs 3,100.

Officials, however, argue that opening of bank accounts is more important and savings will pick up gradually. “A bank account will help inculcate the habit of saving,” said an official. The Jan-Dhan Yojana was launched by Prime Minister Narendra Modi on August 28 with the goal of eradicating “financial untouchability” of the poor by opening at least one bank account for every family in the country in less than six months.

At the time banks had been given a target of opening 7.5 crore accounts under the scheme. Each of the accounts come with a debit card, Rs 1 lakh accidental insurance policy and Rs 30,000 free medical insurance cover for those who enroll before January 26. Depending on the performance of the accounts in the first six months, banks will later extend a Rs 5,000 overdraft facility to one account per household.

While Samajwadi Party led-Uttar Pradesh has opened 1.16 crore bank accounts under the scheme, Trinamool Congress-governed West Bengal has opened 49.54 lakh bank accounts. BJP-led Rajasthan and Madhya Pradesh have opened 46.3 lakh and 45.82 lakh accounts, respectively, under the scheme till October 29, 2014. The finance ministry, which has been keeping an eye on the progress of the scheme is hopeful that it will meet the target for account opening this fiscal. The data reveals that of the 6.99 crore accounts opened, 3.69 crore RuPay debit cards have also been issued while 2.15 crore accounts have been seeded with Aadhaar numbers.

However, experts say that for the scheme to be truly successful, banks need to provide doorstep services. “Bankers need to understand that if they want to really do financial inclusion, accounts have to be active… they need to provide doorstep banking along with overdraft facility from day one so that the holder can easily access the services,” said Chetna Vijay Sinha, chairperson, Mann Deshi Bank Organisation that runs a regulated cooperative bank for women.

Friday, October 31, 2014

Get account holders under Jan Dhan to use RuPay card, FinMin tells banks

To get customers opening accounts under the Pradhan Mantri Jan Dhan Yojana to use their RuPay debit cards, the Finance Ministry is believed to have asked banks to take a carrot-and-stick approach.
So, to remain eligible for the ₹1 lakh accident insurance cover that comes with the Basic Savings Bank Deposit Account (BSBDA), the cards may have to be used at least once in 45 days.

At a recent meeting, Finance Ministry mandarins told top bankers that mere issuance of cards will not suffice. The cards have to be activated at the earliest and made operational. 

Ministry officials said that customers have to be advised to operate the cards at a certain time interval, say, once in 45 days, in order to continue to enjoy the accident insurance cover without any charge to them.

Banks were also advised to have an “SMS” alert system for BSBDA beneficiaries so that they use the RuPay card once in 45 days and remain eligible for the accident insurance cover, said a senior official of the Union Bank of India.

RuPay is the home-grown card payment scheme launched by the National Payments Corporation of India (NPCI) to rival global payment processing giants Visa and MasterCard. 

It has been conceived to offer a domestic, open-loop, multilateral system which will allow all Indian banks and financial institutions to participate in electronic payments.

This card is accepted at all ATMs (for cash withdrawal) and at most of the PoS machines (for making cashless payment for purchases) in the country.

A ‘Basic Savings Bank Deposit Account’ or ‘no-frills’ account does not have any minimum balance requirement. The services available for such accountholders include deposit and withdrawal of cash at bank branches as well as ATMs; receipt/credit of money through electronic payment channels or by means of deposit/collection of cheques drawn by Central/State Government agencies and departments.

While there is no limit to the number of deposits that can be made in a month, accountholders will be allowed a maximum of four withdrawals in a month, including ATM withdrawals; and comes with the facility of ATM card or ATM-cum-debit card.

The Pradhan Mantri Jan Dhan Yojana (PMJDY), which was launched on August 28 by Prime Minister Narendra Modi, is a National Mission for Financial Inclusion. 

Financial inclusion is the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low-income groups at affordable cost 

The Yojana seeks to ensure access to financial services — namely, banking/savings and deposit accounts, remittance, credit, insurance and pension — in an affordable manner.
Banks have been set a collective first target of reaching 7.5 crore unbanked families under the PMJDY by January 26, 2015.

Sunday, October 26, 2014

We expect credit growth to pick up by end of third quarter: Bank of India MD Vijayalakshmi Iyer



Bank of India is planning to set up a subsidiary dedicated to social work, a first among its domestic peers. Amid increasing competition, the public sector lender is trying to consolidate the credit portfolio, cut expenses and focus on fee and treasury income to stay profitable. The bank is focusing on bringing down stressed assets by strict monitoring and faster resolution of cases. Vijayalakshmi Iyer, chairperson & managing director, tells Manju AB how she is steering the bank out of its bad debt problem by personally attending to large accounts. Excerpts from the interview:

What is driving business at Bank of India? With credit growth being at a decade low, how will banks beat the trend and still stay profitable?
The growth has been very low in tune with the industry trend post March 2014. This actually provided an opportunity to consolidate credit portfolio and to put more resources for monitoring mechanism. These efforts will result in lower credit cost and will improve profitability. With more focus on timely resolution of stressed assets, the profitability will, in fact, improve.

When do you expect corporate credit to pick up? And which sectors do you see reviving faster than others?
There has been slowdown in corporate credit demand. Many steps are being taken by the government to enable economic growth to assume faster pace. With pro-growth environment being created, we expect credit growth to pick up by the end of third quarter of the current fiscal. We expect pick-up in SME sector to lead.

How is the retail credit growth?
Notwithstanding lower corporate demand for credit, the retail sector continues to grow resulting in better balancing of portfolio. Focus on agriculture, retail and MSME is driving the business. Widespread geographical spread of branches is helping us growing in these sectors. During the first half of this fiscal, schematic retail loan has grown 12.21% from Rs 21,982 crore as on March 31, to Rs 24,665 crore as on September 30. The growth is 28 % year on year (Rs 19,284 crore to Rs 24,665 crore). Home loan growth has been 31% on a year-on-year basis (Rs 11,400 crore to Rs 14,913 crore). Home loan and LAP constitutes 74% of schematic retail loans as on September 30, 2014 (home loan Rs 14,913 & LAP Rs 3,424 crore). Total retail loans (personal loan segment) of the bank stood at Rs 29,654 crore as on September 30, 2014. Considering the growth pattern in the earlier years, we expect about 40% growth in retail loans during 2014-15.

What will be the key driver of your profits during the current quarter?
The deposit rates have softened in the absence of demand for credit. This will help in achieving lower cost of fund and better "NIM' (net interest margin). Initiatives have been taken to curtail operational expenses as well as to increase non-interest income. All out efforts are being made to achieve lower credit cost by improving monitoring process and also by achieving speedier resolution of non-performing assets. There are two major sources of fee income, in addition to general banking services including remittances, etc. That is (1) business related to credit portfolio and (2) fixed income portfolio. Given the softening of yields on fixed rate bonds, we do expect gains on that account to contribute to our profits.

How are your deposits growing? Any specific campaigns to mobilise CASA (current account savings account)?
It is desirable to match growth in deposits to growth in credit business. Given that demand for credit has been muted, the deposit portfolio is registering slower growth in keeping with opportunities for deployment. We are placing thrust on CASA business and special drives are being arranged across the country to expand the customer base further. Technology related initiatives are being implemented to make banking more customer friendly. The government business is also being expanded with a view to increase CASA portfolio.

How is the joint lending forum (JLF) helping the bank combat the rise in bad loans? Is the JLF being implemented in all earnestness with co-operation from all banks?
Joint Lending Forum (JLF) has been helping the banking system in early resolution of stressed accounts as RBI guidelines warrants time bound rectification process by all banks if majority of banks (75% in value and 60% in numbers) agree for any of the three options available, that is rectification, restructuring or recovery. The implementation of corrective action plan under JLF route has almost stabilised barring addressing of few issues like short period available for implementation of restructuring under CDR
on-CDR route.

Asset reconstruction companies (ARCs) say banks need to give bigger discounts for sales to happen. What has been your experience?
In fact, the role of ARCs is very important in faster resolution of stressed assets. We feel that ARCs need more capitalisation to meet the revised norms of payment of cash up-front of 15%. Admittedly, with higher cash up-front, the ARCs will have more commitment, which will lead to even faster resolution. Bigger discounts on sales will force banks to have bigger hit to their P&L.

Now social media networks like Facebook and Twitter are attempting at money transfers, printing cheque books, etc. Is there any threat to traditional banking from these alternate channels?
There is no question of threat. Innovations in technology are always welcome as they help in achieving higher level of efficiency in providing banking services. It is desirable to remain aligned with evolving technology. We have focus on IT enabled services to ensure that our customers have access to state-of-the-art technology. We were the first PSU bank to introduce first ATM long back in the country. Recently, we introduced cash remittance through ATM to non customers without use of ATM card. It has received good response. Most of our ATMs are now enabled to provide this service of Instant Money Transfer (IMT).

Banks are planning to sell off their non-core assets to streamline the organisation What would be your non-core assets that you might put on the block?
We do have strategic investments and keep reviewing the same from time to time. It is always desirable to realise gains on such investments to augment capital. It is a continuous process.

You had plans of setting up a wholly owned subsidiary for corporate social responsibility. What has been the progress of that?
With a view to have consistent approach for achieving our corporate social responsibility objectives, we have proposed formation of a trust. We have approached appropriate authorities for approvals. We are expecting approvals soon.

Will you have to raise money for Basel III compliance? Will you give some details on the fundraising plans of the bank?
We need to strengthen our capital structure to ensure consistent growth while maintain the desirable levels of capital adequacy. This is a continuous process. We are observing capital market developments very closely and have plans to raise capital at an appropriate time.

Finally, how is Jan Dhan scheme faring and how much of deposits in these accounts if at all have you collected?
Our bank has opened 28.82 lakh accounts from August 16 to October 16 under Jan Dhan scheme and collected Rs 70.07 crore deposits. The scheme is in full swing by means of carrying out household surveys in all the allotted Sub Service Areas (SSA) and wards which is expected to be completed by October 31.Number of RuPay Cards issued by our Bank so far is 17.94 lakh. The backlog is expected to be cleared by November 15. Aadhaar seeding and opening of accounts through e-KYC is picking up and we have seeded 23.48 lakh accounts and opened 11,716 accounts through e-KYC so far.

Have you also rolled out Swachh Bharat campaign?
In this national endeavour, BOI has committed Rs 4 crore for construction of toilets in government schools. The project will cover 85 girls secondary schools in Jharkhand. List of schools and districts covered in the state has already been conveyed to finance ministry, and ministry of HRD. Implementation will be done through local agencies in coordination with BOI zonal offices situated in Jharkhand.

Amazon shopping, Jet Airways booking now easy via RuPay Card


NPCI has already issued more than 30 million RuPay cards.
After Flipkart, home-grown payments gateway RuPay has tied up with Amazon and one of the largest carriers Jet Airways.

With this, the RuPay debit card holders can now shop best deals on Amazon and book air tickets on Jet Airways, the Reserve Bank-promoted National Payment Corporation which issues the RuPay cards said in a statement today.

"Acceptance on Amazon is a breakthrough for us. We are glad to offer a wider horizon to our cardholders to transact online. Also, our integration with Jet Airways will definitely benefit our cardholders,," says NPCI managing director AP Hota said.

Commenting on the tie-up, Amazon India general manager for payments Srinivas Rao said, the arrangement is in line with its strategy of offering the widest set of customers a variety of payment options that will enhance their shopping experience.

The NPCI had last week announced that it has tied up with Flipkart, Snapdeal and LIC who are among over 15,000 merchants who will be accepting the RuPay cards, which are the homegrown alternative to foreign gateways like Visa and MasterCard.

Following the tie-up Jet Airways has begun accepting RuPay cards on their site for air-ticketing, airlines’ senior vice-president Gaurang Shetty said.

NPCI has already issued more than 30 million RuPay cards, which are accepted at all ATMs, and by 9.8 lakhs POS terminals and over 15000 online merchants.

The domestic online retail industry, as per a Crisil report, is expected to touch Rs 50,400 crore by FY16 from Rs 1,500 crore in FY08.

According to online industry body IAMAI, travel has emerged out as the most transacted segment in the online space accounting for 60 percent of online payments. The value of online payments for travel industry stood at Rs 50,000 crore in FY13.

Sunday, October 19, 2014

RuPay cards to boost e-commerce, says SBI

RuPay e-Commerce has roped in big online merchants such as IRCTC, Life Insurance Corporation (LIC), Flipkart and Snapdeal to facilitate online payments. 

RuPay cards’ acceptance has grown to over 15,000 online merchants with having a customer base of 30 million RuPay cards that are acceptable at all ATMs and 9.8 lakh PoS (point of sale) and over 15000 online merchants in the country, said RuPay in a statement. 

With this arrangement, RuPay card holders can book train tickets on irctc.co.in, make online payments for LIC premium, shop on Flipkart.com, Snapdeal.com, Homeshop18.com and book movie tickets on Bookmyshow.com. Also, the country’s largest bank- State Bank of India (SBI) has started accepting RuPay cards on its payment gateway. RuPay e-Commerce service was launched in June 2013 with an additional anti-phishing feature for security checks, the statement 

“Team-SBI is quite upbeat about the development. State Bank Payment Gateway (PG) facilitates every month, around 1.3 crore Card-Not-Present (CNP) transactions. Addition of RuPay platform will give a further boost to e-commerce transactions. Flipkart is one of our active merchants. Acceptance of RuPay Card for online transactions by Flipkart will add to the transaction flow from their site to our NetBanking and PG”, said B Sriram, Managing Director at SBI. 

Sachin Bansal, Co-founder and CEO, Flipkart, said “Payments is a core area of focus for Flipkart. We are constantly looking for ways to expand and improve the payments experience on our site and this initiative with RuPay is an important step in that direction. We look forward to working with SBI and NPCI on more such initiatives that will contribute towards enhancing the payments ecosystem for our customers”. 

RuPay scheme aims at addressing the needs of Indian consumer, merchants and banks with benefits attached to it including - lower cost, customized product offering, protection of information related to Indian consumers, electronic product options as relevant to untapped/unexplored consumer segments and Inter-operability between payment channels and products. 

A P Hota, MD and CEO, NPCI said, “Acceptance on large merchants like IRCTC, LIC, Flipkart, Homeshop18, Snapdeal and BookMyShow among others marks an important milestone for RuPay ecommerce. Today, 30 million RuPay cards have already been issued in the country. RuPay cards today are enabled at all ATMs across the country, 9.8 Lakhs POS terminals and over 15000 online merchants. It is our vision to touch every Indian with at least one payment mode of NPCI by 2020”
NPCI offers e-commerce solution PaySecure, through which a RuPay cardholder uses ATM PIN to make an online transaction which is easy and quick.

Every BPL household to have RuPay card in 6 months

Speaking on the sidelines of the launch of RuPay card at GSC Bank on Tuesday, S K Gupta, chief project officer, RuPay, National Payments Corporation of India (NPCI) said that in six months, every household in the country below poverty line (BPL) will have a bank account and a RuPay card. More than 40 million RuPay cards have been issued in the country till now. "There are 2,000 licenced banks in the country. Earlier, only 50-55 banks could issue debit cards but now around 310 banks are issuing RuPay cards," said Gupta.

RuPay card which was launched 2.5 years back is fully Indian card payment network set up by NPCI. Along with a RuPay card, customer also gets an accidental insurance of Rs 1 lakh, the scheme will be valid till March 2015.

Under Pradhan Mantri Jan Dhan Yojana (PMJDY), three districts in Gujarat have achieved target of opening one bank account in each household. Porbandar, Mehsana and Gandhinagar have reported that at least one bank account of all households has been opened thereby making these areas fully saturated in PMJDY. There are 1.22 crore households in Gujarat, of which more than 95 lakh households have one or more bank accounts as of now. As on October 7, 2014, 5.52 crore accounts have been opened and a deposit of Rs 4268 crore have been mobilized under PMJDY so far.

Guj State Co-op Bank launches RuPay card

amit shah
Gujarat State Co-Operative Bank (GSC) got a new feather in its cap on Tuesday. BJP President Amit Shah inaugurated RuPay ATM and debit card at its head office in Naranpura area in Ahmadabad.
On this occasion, Shah who himself is a cooperator and had been Chairman of co-op banks in the past dwelt on the issue of cooperative movement at length.

The GSC Bank is the apex bank of 18 co-operative banks in Gujarat having more than 1,200 branches across the state. While launching the first ‘RuPay’ ATM and debit card for the bank, Shah said one should not underestimate the capabilities of such banks.

Apart from Gujarat, Shah claimed that co-operative movement is still active in many other states, such as Maharashtra, Karnataka and Rajasthan.

“I know the strength of co-operative movement. This newly launched RuPay card and ATM is just a beginning. Looking at the sheer size and reach of this sector, I am sure that within next 5 years, debit cards issued by co-operative banks will be highest in India,” he said.

Jan Dhan scheme goes against KYC norms, is time bomb for banks



Do not get me wrong. I believe financial inclusion is a wonderful initiative and everybody should have access to a bank account. The concern I have is how this should be done.

Shortly after the budget, on August 28, the Jan Dhan scheme was announced. Its purpose was to make opening a bank account attractive and thereby to coax individuals who do not have a bank account to open an account. As sops there were several inducements – the account could be opened with no deposit; accident insurance of Rs 1 lakh; life insurance cover of Rs 30,000; an overdraft facility of Rs 5,000 and a RuPay debit card to withdraw money.

Banks were asked to promote Jan Dhan, and in the first ten days a mind boggling 3 crore accounts were opened. By October 7, 5.52 crore accounts had been opened.

My concern stems from various factors.

The first is that the account can be opened with just two signed photographs. An individual does not have to submit PAN card or Aadhar card or any other documentation. My concern here is two-fold. This submits that no real verification of an individual is required and that goes against the purpose of the Know Your Customer (KYC) rules that were brought in to check money laundering and terrorist activities.

Earlier before these rules were enforced individuals opened accounts in fictitious names to "bank" their black money. The other worry is that individuals will have multiple accounts in different banks which they may then misuse for the benefits under the scheme. The one-page account opening form has a column seeking self-declaration that a person does not have any account in any bank. This self-declaration is meaningless as there is no mechanism to stop multiple accounts. Furthermore there is no inter-bank arrangement to stop duplication.

Bankers agree that accounts opened without a valid address proof are high risk. They are unable to do anything though in this regard as the scheme permits accounts to be opened with two signed photographs.

The Prime Minister after announcing the scheme wrote to the chairmen of all public sector banks to aggressively open accounts – the target given was 7 crore accounts. The large number of accounts opened is testimony to the enthusiasm displayed by these worthies. State Bank alone opened 11,300 camps solely to open Jan Dhan accounts. Others were not far behind. There have been 12-hour Saturday camps and account opening Sundays. The issue that needs to be addressed is whether banks can service these accounts. Service in some of the large public sector banks are often found wanting. The infrastructure does not exist to handle this volume. No one seems to have addressed the issue on banks expect to manage this.

In the initial years of bank nationalisation, public sector banks were given targets that had to be met. There were loan melas held and large amounts were disbursed. These ended up as bad loans as the recipients viewed these loans as a right. I remember a public sector banker who told me that he was told that he should disburse amounts to farmers for digging wells. In this endeavour he would meet villagers who had land and force them to take money to dig wells they did not ask for.

The aim was to meet the target. More often than not the money was spent for another purpose as no follow-up was done and in time they became bad debts. I foresee a situation that is similar. Many will run up an overdraft of Rs 5,000 and then disappear off the grid or open another Jan Dhan account at another bank and in time run up another overdraft. Public sector banks labouring with huge non-performing loans cannot afford to be saddled with another potential time bomb. I foresee too that even though bankers may say that all will not be permitted to run up an overdraft, there would be political pressure that will be brought to bear and bank managers may have no alternative.
I honestly hope these concerns do not become a reality but I am frightened. We, as a race, have a tendency to subvert even the best of intentions and financial inclusion is a good thing.

Thursday, October 9, 2014

Jan Dhan Yojana: Delay in issuing RuPay cards may block benefits


After the initial euphoria over Jan Dhan Yojana, operational difficulties are casting clouds over the execution of the ambitious financial inclusion scheme. 

The most serious concern for the government is delay in issuing the RuPay cards by banks after opening of the accounts, apart from significant duplication of the accounts. 

“These are the issues which have been observed by us nationally. Proper data on the issue of RuPay cards should also be maintained,’’ N Srinivasa Rao, Director, Ministry of Finance, said at a bankers’ meeting here last week. 

According to the Ministry, 5.29 crore bank accounts were opened as on October 2, 2014 and 1.78 crore RuPay cards have been issued. It had also asked all banks to set up exclusive grievance cells to provide service to the account holders. 

Without the issue of Rupay cards, the assured benefits such as RuPay card offers and personal accident insurance and permanent disability of ₹1 lakh cannot be extended to the accountholders. 

Supply constraints

When contacted, M Anjaneya Prasad, Executive Director, Syndicate Bank, said that a major reason for the delay in issuing RuPay cards was supply constraint.

“As every bank is opening new accounts, there is lot of demand for the cards which have to be issued by the National Payments Corporation of India. The supply needs to be augmented as about 10 crore cards have to be issued by 2015 for the new accounts holders,” he said.

According to senior executive of Canara Bank, there is also need to work out the cost aspects of the cards. As of now, ₹1 is being charged for the card, which is borne by banks. 

The total number of banks issuing RuPay cards is now more than 250 and the card base as on April 30 is over 17 million and is growing at a rate of about 3 million a month. 

“This will go up significantly, thanks to the new scheme,” he said. 

Duplication of accounts

Another issue for banks is duplication of accounts as many no frills accounts were already opened under financial inclusion drive so far. 

Banks are hoping to deal with the issue with seeding of all accounts to one Aadhar number so that all could be linked.

It remains to be seen how the knotty issues are dealt with in the days to come.

5.29 crore accounts opened; 1.78 crore RuPay cards issued under PMJDY





"As on date, 5.29 crore accounts have been opened under PMJDY, of which 3.12 crore are in rural and 2.17 crore are in urban areas. RuPay Card have been issued in 1.78 crore accounts," an official statement said.

Prime Minister Narendra Modi had launched this ambitious scheme of financial inclusion on August 28.

The benefit of Pradhan Mantri Jan Dhan Yojana (PMJDY) can be extended to existing account holders without opening a new account.

The statement said Mission Director and Additional Mission Director reviewed the progress in implementation of PMJDY with Executive Directors of PSU banks and some of the private banks such as Axis Bank, HDFC Bank, ICICI Bank and IndusInd Bank.

It said banks have been advised to increase their capacity to issue RuPay cards and clear the backlog quickly.

While most of the banks expect backlog to be cleared by October 15th, in some banks it may take four weeks, it added.

Banks have initiated the survey work for identification of uncovered households which will be completed by October 10. This is excluding the states of Haryana and Maharashtra where
survey work has been temporarily suspended in view of Assembly Elections, the statement said.

The main features of the PMJDY scheme include Rs 5,000 overdraft facility for Aadhar-linked accounts, RuPay Debit Card with in-built Rs 1 lakh accident insurance cover.

Besides, account holders under the scheme will get life insurance cover of Rs 30,000. This is an additional benefit that was announced by the Prime Minister during the launch of the scheme.

The government is also considering transfer of kerosene oil and LPG subsidies directly to bank accounts.

Presently, the government subsidies the products so that consumers can buy fuel below market price, however, under direct benefit transfer the consumer will be paid cash subsidy so that he can buy kerosene and LPG at market price.

Jan Dhan target to be met, on paper

 20140924_122336

Enquiry about a Jan-Dhan account form at a Bank of Baroda branch in the National Capital Region (NCR) was greeted with: but don't you have an account in any bank? After 10 minutes, the form did eventually come, with a stare that had 'why burden us with another account that is going to remain idle' written all over it.

Just a few kilometres away, one of the branches of IDBI Bank had run out of forms. An executive explained that since there was a huge pile of forms yet to be processed, it had been decided to go slow in opening new accounts. A nearby United Bank of India branch is yet to issue RuPay cards to some customers who opened their accounts nearly a month ago. One such customer said: "Bank officials were clearly in no mood to open our accounts in the first place. We were asked to come some other time. When we persisted, they went through the motions. But we are yet to receive anything."

FAST TRACK INCLUSION
  • 47,630,652 - Number of new accounts opened
  • 13,303,975 - Number of RuPay cards issued
  • Rs 3,226.97 crore - Balance in accounts
  • 36,574,947 - Number of zero balance accounts
Status as on September 23 Source: Ministry of finance

As the Jan-Dhan scheme completes a month since its official launch, reports coming in from various parts of the country suggest the stated target of 75 million new accounts will be achieved much before January 26 next year. But the scheme's implementation is patchy. Agents are charging commissions for filling forms in Bihar. Reports indicate in Madhya Pradesh and Uttar Pradesh, stationery shops are selling forms as bank branches have run out. "These reports are not baseless. Some of these things are happening. But an overburdened banking system cannot be expected to do everything," said an executive with a leading public sector bank (PSBs).

In terms of numbers, the scheme has exceeded expectations. By September 23, all banks put together had opened 47 million new accounts. RuPay cards have been issued to 13 million people. Of all accounts opened in less than a month, 36 million are zero-balance ones.

Bankers this reporter spoke to complain they are flooded with inane queries. What are the benefits of this loan scheme? When will the insurance money come into the account? How much loan can be taken against this account? Can insurance money multiply with multiple accounts and can the RuPay card serve as another proof of identity? "With such a deluge of questions every day, two executives of a bank branch, on an average, are entrusted with the task of dealing with them," said another bank executive. It was bound to have some impact on core banking operations, he added.

The less-than-enthusiastic response of bankers stems from the fact that most branches have been asked to hold 12-hour camps every Saturday. At times, staff are made to come in on Sundays to ensure satisfactory completion of targets. "Even if we take the help of business correspondents, verification of documents and processing of forms have to be done by bank staff. There is a limit to how many forms can be processed in a day," said another executive with a PSB.

Bankers also say multiple accounts might prove a spoiler. "I will say 50-60 per cent of all the accounts that have been opened under the Jan-Dhan scheme are by those who already have accounts in other banks," said the executive of the leading bank. Other bankers concurred. In fact, this reporter came to know about a person who opened a new account under the scheme in the branch where she already had an account. "What is wrong in this? If there is a new scheme, why should we be denied its benefits just because we are already part of the banking network?" her husband, a resident of Ghaziabad, asked.

The one-page account opening form has a column seeking self-declaration that a person does not have any account in any bank. But bankers say the self-declaration is meaningless as there is no mechanism to stop multiple accounts. "If a person has multiple documents as proof of identity, he can open multiple accounts and our system cannot detect it. There is no inter-bank arrangement to stop duplication," said the branch manager of another PSB.

Bankers say accounts opened without valid address proof are put in the high-risk category and these are unlikely to get the overdraft facility. Such account holders will be asked to furnish proof of residence within a year, as is the case with all accounts in the high-risk category. The Bank of Baroda form mentions that eligibility for an overdraft facility of up to Rs 2,000 is "satisfactory operation" of an account for at least six months. "There is a great deal of misconception about the overdraft facility. Those who have opened accounts under this scheme are under the impression that they automatically become eligible for the overdraft facility, which is not the case," said the executive of the leading PSB.

On accident insurance of Rs 1 lakh for each account holder, bankers say it comes automatically with the RuPay card. What it means is that existing account holders who opened their accounts prior to the launch of the scheme may get RuPay cards issued against their old accounts and become eligible for accident insurance. However, bankers are awaiting further instructions on who is going to pay the premium for the life insurance cover of Rs 30,000 that has been promised with each Jan-Dhan account.

Tuesday, September 30, 2014

LIC will initially foot the bill for Rupay Debit Card Jan Dhan cover

The Government will, in due course, part-finance Life Insurance Corporation’s efforts in providing life cover of ₹30,000 to each Jan Dhan account-holder, Financial Services Secretary GS Sandhu said.


LIC will initially dip into its own social security-related fund to offer the life cover, and the Government will also pump money into LIC for this purpose, Sandhu told BusinessLine on the sidelines of an Assocham event here on Tuesday.

For the first year, there will not be any fund infusion from the Government and LIC would have to rely on its own internal resources to offer this facility, he said.

Gaining traction

The Pradhan Mantri Jan Dhan Yojana, which was launched on August 28, has received tremendous response with as many as 5.1 crore accounts opened so far.

The most comforting aspect is that banks have succeeded in ramping up their RuPay card rollout in recent days, Sandhu said.

As many as 1.6 crore RuPay debit cards have been issued so far.

Till September 24, only 50 lakh RuPay debit cards were issued under the scheme, raising concerns over the decision by banks to place orders only with two vendors.

But now banks have really started ramping up, Sandhu said, adding that the targets for PMJDY are likely to be met much before January 26 next year.