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.

RBI will cut interest rate at the right time: Financial Services Secretary

Secretary Financial Services G. S. Sandhu announced for meeting with IBA (Indian Bankers Association) today on issues of salary revision of bankers to break dead locks as earliest as possible at an ASSOCHAM event held in New Delhi today.

Reserve Bank of India (RBI) is negotiating with the banks employees as there is a gap between the demand and offer and we will try to resolve the deadlocks very soon”. We are also going to call IBA to break this dead block as earliest as possible, said Mr. Sandhu at an ASSOCHAM event on “ASSOCHAM 10th Annual Banking Summit cum Social Banking Excellence Awards 2014” here today.

Replying on the RBI monetary policy, Mr. Sandhu said, “"RBI fully understands the issue, it fully understands needs and expectation of markets, so they will take a view (on cutting policy rates) when the time is right.”

While addressing the conference, Mr. Sandhu said, one of the important thing which was recently announced was the bank-recapitalization to meet the future challenges for growing economy and high trajectory. The ministry is preparing a blueprint on this and raising capital from the market and from other potential resources”.

He further said, the number of accounts opened under the Pradhan Mantri Jan Dhan Yojana has touched nearly around 5.1 crore account and 1.6 crore RuPay debit cards have been issued so far, said Mr. Sandhu at an ASSOCHAM event
   
In order to provide the much needed thrust a flagship programme called the “Pradhan Mantri Jan-Dhan Yojana” was announced by Prime Minister. He said, National Mission on financial inclusion encompassing an integrated approach to bring about comprehensive financial inclusion of all the households in the country. The plan 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, said Secretary, Financial Services.

In addition, the beneficiaries would get RuPay Debit card having inbuilt accident insurance covers of Rs. 1 Lakh. The plan also envisages channeling all government benefits to the beneficiaries account and pushing the Direct Benefits Transfer (DBT) scheme of the union government, added Mr. Sandhu.

The technological issues like poor connectivity, on-line transactions will be addressed. Mobile transactions through telecom operators and their established centres as Cash Out Points are also planned to be used for financial inclusion under the scheme, points out the Secretary of Financial Services.        

Mr. R K Gupta, Executive Director of Bank of Maharashtra said, “Financial inclusion is nothing but providing banking & financial services to everyone in fair, transparent & equitable manner and at an affordable cost”.

Mr. Gupta further said, bank have perhaps the largest stake in the success of financial inclusion. However to realize this opportunity, they will need to create an entirely new portfolio of products and services delivered through radically different distribution structures which are aligned to the needs and lifestyles of the financially excluded consumer.

While addressing the conference, Mr. Sunil Kanoria, President-elect ASSOCHAM said that we need to think out of box and experiment with the new models of banking where banking penetration will not depend on bricks-and-mortar offices, but no technology. Mobile banking is something which needs to be considered seriously. Mobile technology has changed our lives and the way we communicate and do business. It has the potential to redefine banking too. There is already a national drive going on in the country to create an electronic infrastructure in the form of Unique Identification Authority of India (UIDAI) or the Aadhaar platform. 

Other who also spoke during the conference were Mr. M. Narendra Chairperson, ASSOCHAM National Council for Banking & Finance and Former CMD, Indian Overseas Bank, Mr. Abizer Diwanji, National Head of Financial Services E&Y, Mr. Nikhil Sahni, Senior President, Government Relationship Management, YES Bank, Mr. R. K. Gupta Executive Director Bank of Maharashtra and Mr. D. S. Rawat Secretary General ASSOCHAM..

Wednesday, September 24, 2014

PMJDY FAQ: Pradhan Mantri Jan Dhan Yojna Facilities, Mobile Banking, Withdrawal Limit & More

Why Jan Dhan Yojana was launched?
With a population of over 125 crore, 40% of families do not have access to banking and other financial services and such households have to rely on untrusted credit lenders who charge heavy interest from them. So the basic objective was to provide account to every family along with banking services.

What target government has set to make this scheme a success?
By 26 January 2015, government has set a target of opening one basic account for every 75 million (7.5 crore) households.

How will this target be achieved?
In order for easy access to the banking services, bank outlets would be open within 5 kilometer distance of every village. In fact, on the day of the launch over 77, 892 camps were organized. Also to speed-up the process, government has asked banks to organize special camps on every Saturday between 8am-8pm.

More recently, government has instructed to open bank accounts for workers under Mahatma Gandhi National Rural Employment Guarantee. These workers are currently paid through accounts held in either post-offices or co-operatives and very few workers have their bank account. This way, over 3.5 crores will be immediately created for non-account holders.

How many accounts have been opened till now?
Till date number of accounts have been opened by the banks (in lakhs) as follows:
SBI – 30
PNB – 20.24
Canara Bank – 16.21
Central Bank – 15.98
Bank of Baroda – 14.22

What banking facilities will a account holder get?
Through this Yojana, account holder will get universal access to basic banking services such as:
1) Withdraw cash
2) Deposit money
3) Transfer of funds
4) Check balance enquiry
5) Get mini-statement
6) Mobile banking facility
7) Become financially literate through literacy programmes drive. Learning material would be distributed in most of the Indian languages for everyone.

Where can be above mentioned banking facilities availed?
Account holder can use these facilities at any of bank branches where the account was opened. However it is required by the banks to scan and upload the signature/thumb impression along with the photograph through the core banking system (CBS). Individuals can also make use of RuPay card at ATMs and other online purchases.

How was the name, logo and tagline for the Yojana decided?
Government had run competition through their platform “MyGov” requesting participation for suggesting name, logo and tagline for this scheme. The competition was actively participated and over 6000 entries were received. And the winner for the logo was a female whereas the winner for proposing the name “Jan Dhan” were three individuals and the prize money was distributed amongst each. Logo winner was awarded Rs. 25,000 and Rs. 10,000 was given to each member who proposed the name. Prize money was given by honourable prime minister of India Shri Narendra Modi. However the tagline was not suggested by any participating member.

Is mobile banking facility available?
Yes, account holder can use their basic smartphone to access their account, check balance and transferring money. Most importantly all these facilities does not require high end smartphone and even a ordinary smartphone can be used.

How many members in a family can open the account?
Two members in a family can open the account.

What are the documents required for opening the account under PMJDY?
There is a minimal document required.

What if you don’t have required documents, can you still open the accounts?
Individuals with no required documents can still open the account. And these accounts are called “Small Accounts”.

What are the benefits of accounts opened under PMJDY?
Account under Jan Dhan Scheme offers multiple benefits. Every account holder will get accident insurance cover of 1 lakh and free life insurance cover of 30,000. an RuPay debit card. But these benefits are only for individuals who open the accounts before January 26th, 2015.

Can existing account holders open Jan Dhan Account?
The main objective of PMJDY was to open accounts for individuals with no bank account. However in the initial days of launching the scheme, many existing holders managed to open the account in order to get the benefits, as banks could not scrutinize each and every individual. However, recently it was stated by the government that even existing account holders can get accidental insurance benefit of 1 Lac after they are issued RuPay card and there is no need to open separate account.

What if address proof of present address is not available
This is the most common question faced by migrants since they have current address would be different than the one mentioned on the address proof submitted. In such cases, individuals will have to submit a simple declaration about the current address.

What is the withdrawal limit and deposit limit
Withdrawal limit is set at Rs. 10,000 per month whereas deposit limit is less than Rs. 1 Lakh.

How to avail overdraft facility of Rs. 5000?
Banks requirement to avail overdraft facility is satisfactory operation of bank accounts for minimum 6 months. Post that, sanction would be given to one overdraft account per household.

What if RuPay card is not issued after opening the account?
As of now, the issuance of RuPay debit card is little slow since many of Indian banks have not adopted the RuPay payment system. So government has asked all the banks to speed-up the process.

What is the account opening fee?
There is no fee to open the account. It is totally free.

If I have any query regarding opening the account, how can I get it resolved?
Government of India has set-up two helpline numbers 1800-180-111 and 1800-110-001 for information or queries related to this Yojana.

Top Differences between RuPay Card vs Mastercard, Visa and AmEx

RuPay card is India’s answer to the two most dominant market transaction processing players in the world Visa, MasterCard, AmEx owned by Visa Inc., MasterCard Inc. and American Express Co. respectively. India is now the sixth country in the world to have domestic payment gateway system. Other five countries are US, Japan, China, Singapore and Brazil.

Having our own domestic card payment network which helps in electronic money transfers will help both banks (between 200-250 member banks) and consumers in the following way:
  • Processing Fee: Since every transaction through RuPay will take place within India, the banks will have to pay less service charge to the payment gateway as compared to Visa, MasterCard and others. For e.g. If a person does a transaction of say Rs. 2,000 then banks will have to pay around  Rs.. 2.50 when RuPay is used whereas for the same transaction amount, Visa or Mastercard will charge Rs. 3.25. Technically speaking, transactions done through international cards is processed in foreign country which involves higher charge which helps in generating profit for Visa/MasterCard whereas RuPay transactions would happen domestically so charge would be less.
  • Faster transactions: Since processing would be down within India the transactions would be faster as compared to other cards.
  • International Acceptance: As of now RuPay card doesn’t have international acceptance, whereas Visa or Mastercard have been in the market since many years and accepted by most of retailers online or offline such as Amazon, eBay, Walmart and others. Also National Payments Corp of India (NPCI) who promotes RuPay card is working hard to spread it’s acceptance worldwide by partnering with Discover Financial Services and Japan Credit Bureau (JCB). Read more about where you can use RuPay card and how to use the card for online payments
  • Quarterly Fee: In case of Visa and others banks have to pay a quarterly fee which won’t be required in case of RuPay.
  • Card Type: Currently RuPay offers only debit card whereas Visa and MasterCard offers debit, credit and debit card. However RuPay credit card would be made available hopefully by March 2015.
  • Entry Fee: In case of international cards banks have to pay entry fee to be a part of their network which is not the case with RuPay card i.e. no joining fee for the banks.
  • Member Banks: RuPay card is offered by public sector, select private banks, rural and co-operative banks (total 200-250 member banks) whereas others don’t include such small banks in their network. Checkout eligibility for getting RuPay card and withdrawal limit.
Also to increase it’s spread recently Government of India launched Jan Dhan Scheme under which every account holder would receive RuPay debit card. See also Jan Dhan Yojana benefits. This will directly increase RuPay’s use.

How to apply for RuPay Card



We have seen a lot of MasterCard and Visa. It is time now to switch over to a card scheme which is more Indian. It looks like that India is now ready to welcome its very own card and payment scheme named as RuPay.

RuPay is going to be an Indian venture into the world of card schemes. However, before you jump the guns, you should know that although RuPay is India’s brainchild, it is not hundred percent Indian. RuPay cards are being created in affiliation with Discover Financial Services, which as we all know, is a US based financial company. Nonetheless, RuPay is going to be more Indian than American.

How to apply for RuPay card?

Many public banks of India have already started offering the RuPay card to the consumers. Therefore, if you want to get the RuPay card you can ask your bank for it. The application process is pretty simple depending upon the bank.

While most of the private banks issue the debit cards over the phone after verifying your identity (by asking the TPIN number), the government or public banks require you to fill the form and follow a process to get the new debit card. You can call up your bank and ask about the process to get the RuPay card issued.

Not many private banks are offering the RuPay cards at this time but it is expected that it will be available soon with all of them. The Reserve Bank of India has mandated RuPay card for all the banks but they have been given some time to get it incorporated in their systems.
If you are an existing customer of the bank which already offers the RuPay card then you can apply for a new debit card. If you are opening a new bank account then at the time of depositing the money you can ask the bank to issue the RuPay card.

Will MasterCard and Visa cards be phased out?

No. Reserve Bank of India has no such plans to phase out the existing and popular Master and Visa cards. In fact, the users of these cards will be able to continue using these cards as they have done before.

With the introduction of RuPay card, there will be a tough competition for these financial giants though. You will be able to use your existing debit cards at all the ATM machines and for online shopping as you used to do it before.

What are the benefits of RuPay card?
There are several benefits of using the RuPay card for the Indians. Since Master and Visa cards are provided by the foreign financial institutions the transaction costs are higher. With RuPay cards, the cost of transaction will be lesser because it will happen within India involving no international processing. People will also enjoy bigger savings due to the low transaction fees.

However, there are certain disadvantages too. For instance, while Master and Visa cards offer the reward points 1on every purchase, there is no such thing with the RuPay cards.

Monday, September 22, 2014

'Jan Dhan' Scheme: National Payment Corp Scrambles to Issue RuPay Cards

'Jan Dhan' Scheme: National Payment Corp Scrambles to Issue RuPay CardsAlthough close to 4 crore bank accounts have been opened under the Jan Dhan Yojana so far, there is a huge backlog in the issuance of the Rupay cards by the National Payment Corporation of India (NPCI), the sole issuer of ATM cards for these new accounts.

Over the weekend, Financial Services Secretary G S Sandhu had said that banks had opened 4 crore accounts so far and mobilised about Rs. 3,700 crore as deposits in these accounts.

"Although the number of accounts opened are very high, about 20 lakh (RuPay) cards have been issued so far," National Payment Corporation of India (NPCI) managing director and chief executive A P Hota told PTI.

There is a lag in production of cards which usually requires three weeks to get cleared, according to Mr Hota.

"Personalisation (of cards) takes time because the name has to be embossed on the card. This is such a big order coming all of a sudden. Nobody expected that in one go so many accounts will be opened," he said.

However, he said the backlogs are likely to be cleared in next three weeks.

The scheme was launched by Prime Minister Narendra Modi on August 28 with an aim to boost financial inclusion.

Under the Jan Dhan scheme, account holders will get an overdraft facility of Rs. 5,000. They would also be provided with RuPay debit cards and Rs. 1 lakh accident insurance cover.
The government has envisaged to provide bank accounts to 7.5 crore people by January 26.

Nabard to highlight co-op role in RuPay implementation

The initiative of South Canara District Central Cooperative (SCDCC) Bank Ltd to make primary agricultural cooperative societies (PACS) as part of the payment system under the RuPay Kisan credit card will be taken as a model by Nabard.

GR Chintala, Chief General Manager of Nabard, Bangalore, told Business Line here on Saturday that the Nabard will issue a circular in this regard in another one-and-half months. 

The initiatives of Raigad and Rampur district central cooperative banks in Maharashtra and Uttar Pradesh, respectively, will also be showcased as models. Highlighting the SCDCC Bank model, he said both the tiers of cooperative banking have retained their identity while implementing RuPay cards. 

Here PACS, under SCDCC Bank’s jurisdiction, directly give loans to farmers. For the implementation of RuPay card, these societies open accounts in the books of SCDCC Bank.
Though the accounts are maintained at SCDCC Bank, the funds are routed in such a way that the farmer need not approach the SCDCC Bank branch. He said that the farmer will continue to transact at the micro ATMs at PACS level. 

In Raigad, farmers are the members of PACS but they have their loan accounts at the branches of DCCB (district central cooperative bank). All the accounts are transacted through the DCCB in Raigad. 

The Raigad model will be suited for those districts where the loans to farmers are extended directly through DCCB branches. 

Those districts that follow the practice of extending loans to farmers through PACS can study the SCDCC Bank model. 

He said that 167 PACS come under SCDCC Bank. It has jurisdiction over the revenue districts of Dakshina Kannada and Udupi. The boards of 163 PACS have given their nod for being a part of the implementation of RuPay Kisan credit cards to farmers.

No second account needed for Jan Dhan benefits: Govt


Mad rush: As on date, 4.18 crore accounts have been opened under the
Jan Dhan scheme. - RAMESH SHARMA






The Finance Ministry on Monday said that micro-credit (overdraft) limit of ₹5,000, proposed under the Pradhan Mantri Jan Dhan Yojana (PMJDY), can also be extended to existing savings bank accounts.

This facility will be available to all existing savings bank accounts on application and depending on the satisfactory conduct of the account, the Finance Ministry said in a statement here.
It has also issued instructions to the effect that people who already hold bank accounts need not open a Jan Dhan account just to get insurance benefits under the PMJDY.

The insurance benefits are available through RuPay card and existing bank account holders keen to avail themselves of the insurance benefits (promised under Jan Dhan accounts) can submit an application to the bank branch concerned to get a RuPay debit card.

Once a RuPay debit card is available to an account holder, the insurance benefits of accident cover of ₹1 lakh and life cover of ₹30,000 will be provided to them too.

As on date, 4.18 crore accounts have been opened under the PMJDY.

The Finance Ministry has also said that people who do not have officially valid documents or Aadhaar numbers can still get bank accounts opened by submitting two copies of signed photographs at the bank branch.

However, these accounts will be called “small accounts” and would be normally valid for 12 months. Such accounts shall be continued subject to showing of proof that he/she has applied for any of the officially valid documents within 12 months of opening of the small account.

One can open Jan Dhan A/c by just submitting 2 photos: Finance Minister

Finance Ministry today said people who do not have officially valid documents or Aadhaar numbers can open Jan Dhan bank accounts by submitting two copies of signed photographs at a bank branch.

"RBI has issued guidelines dated August 26, 2014, where people who do not have officially valid documents or Aadhaar numbers can still get bank accounts opened by submitting two copies of signed photographs at the bank branch," an official statement said.

However, it said these accounts will be called small accounts and shall normally be valid for 12 months and shall be continued subject to showing of proof that he/she has applied for any of the officially valid document within 12 months of opening of such 'Small Account'.

These accounts have certain limitations such as balance at any point of time should not exceed Rs 50,000, total credit in one year should not exceed Rs 1 lakh, and total withdrawal should not exceed Rs 10,000 in a month, it said.

It also said the existing account holder need not open another bank account to avail of benefits under Pradhan Mantri Jan Dhan Yojana (PMJDY).

As on date 4.18 crore accounts have been opened under PMJDY.
"In fact insurance benefits are available through the RuPay Card. The existing account holders can submit an application to the concerned branch to enable them to get a RuPay Debit Card in order to avail of the benefits of insurance under PMJDY," it said.

Micro credit limit of Rs 5,000 can also be extended in existing bank accounts on application depending on the satisfactory conduct of the account, it said.
The statement said that there had been complaints from some places about the availability of the account opening forms due to huge rush and certain people taking advantage of such situation.

In view of this, an advertisement has been issued in all major newspapers where the account opening form has been published, it said.

Anybody desirous of opening an account can come and take this application form to the nearest bank branch/bank mitr for opening the account, it said.

This one page account opening form is also available on the website of the Department www.financialservices.gov.in, it added.

Govt yet to decide on who will foot the bill for Jan Dhan Yojana life cover

The Government is yet to firm up the modalities for life insurance cover of ₹30,000 announced by Prime Minister Narendra Modi on August 28 – the launch date of the Pradhan Mantri Jan Dhan Yojana (PMJDY). The Department of Financial Services (DFS) has forwarded a couple of proposals to Finance Minister Arun Jaitley who, as head of the PMJDY mission, is expected to take the final call, official sources said. The proposals under consideration include dipping into the social security fund managed by Life Insurance Corporation and setting up a joint fund by the LIC and the Government.

The basic question that remains unanswered is who will foot the insurance premium bill for the life cover to be provided to 7.5 crore unbanked families in the country.

Indications are that it will fall entirely on LIC, which had initially expressed reservations on bearing this burden. 

As of September 10, as many as three crore PMJDY accounts have been opened across the country — 1.9 crore in rural areas and 1.1 crore in urban areas.

However, the main area of concern is that RuPay cards have been issued to only 33 lakh account-holders, which is about 10 per cent of the accounts opened under PMJDY. 

As the RuPay card is the basis of all benefits attached to the PMJDY, the Finance Ministry has asked banks to sort out the issues that come in the way of speedier implementation of the programme.
These include personalisation of RuPay cards, devising proper distribution of RuPay cards and ensuring that industry be informed about projections for RuPay cards.

Cutting Down Interest Rates - State Bank of India



Banking major State Bank of India cut interest rates on fixed deposits of some timelines. Deposits between one and three years will now earn a rate of 8.75 per cent as against the earlier 9 per cent. But for short-term deposits, the bank has gone the opposite way. For deposits between 180 and 210 days, interest rates are up to 7.25 per cent from the earlier 7 per cent. 

IndusInd Bank has also cut rates, but this cut is on its savings bank accounts. The bank, which was among those which offered higher interest rates on the savings account, brought down interest rate to 4.5 per cent from 5.5 per cent for daily balances of less than ₹1 lakh. The reduction in rate is effective from September 1. The rate remains the same at 6 per cent for daily balances exceeding ₹1 lakh. 

Universally applicable
 
The benefits under the Pradhan Mantri Jan Dhan Yojna are not restricted to new bank accounts. Now, the Government has clarified that existing account holders can get these benefits as well, if they so desire. 

The benefits that can be got are the RuPay debit card with an accident insurance cover of ₹1 lakh and the issue of an overdraft of ₹5,000 after satisfactory operations for a period of time. To get these benefits, all that needs to be done is to apply to the concerned bank branch. 

Fund change
Investors in PineBridge mutual funds, take note. Kotak Mahindra Asset Management will acquire the domestic schemes of PineBridge Mutual Funds, subject to regulatory approvals. 

Of the seven schemes from the PineBridge stable, among the larger ones is PineBridge India Equity Standard fund, a multi-cap equity fund. But across the one-, three-, and five-year periods, its returns are below the category’s average. The fund, however, did edge past its benchmark BSE 100 in all periods. 

PineBridge India Short Term fund, its biggest debt fund, has similarly paled in performance compared to category peers across time frames. 

Absorbing these funds into the Kotak Mahindra stable may inject some improvement in performance. Though not top-quartile performers, quite a few funds from the Kotak house are at least mid-quartile performers. Funds such as Kotak Select Focus have recently picked up in performance as well.
In total, PineBridge has an asset size of about ₹635 crore. The Kotak AMC is bigger with assets under management of about ₹35,885 crore.

Financial Inclusion in India: Moving Beyond Bank Accounts

On August 15, India’s Independence Day, Prime Minister Narendra Modi announced a national mission of financial inclusion. Called the Pradhan Mantri’s Jan-Dhan Yojana — the Prime Minister’s People’s Wealth Program — it envisions bank accounts for all Indians. In its first phase, ending August 14, 2015, the target is 75 million accounts. “I wish to connect the poorest citizens of the country with the facility of bank accounts,” said Modi. “There are millions of families who have mobile phones, but no bank accounts. We have to change this. The change will commence from this point.”

Earlier prime ministers had made similar grandiose announcements, with few results. Indira Gandhi started a campaign against poverty, but it never gained traction. Manmohan Singh started a campaign against unemployment, but that failed to take hold as well. The Modi government is still in its honeymoon period; people are willing to accept Jan-Dhan as a plan but not a reachable destination.
On August 28, Modi formally launched the program. Banks across the country had been working overtime to make the necessary arrangements. On the first day, more than 15 million accounts were added. “It is the end of financial untouchability,” Modi noted. “It is the beginning of freedom from poverty.”

It’s not just the accounts that enticed people to the camps set up by the public sector banks. Every account holder will get a RuPay debit card, launched by the Reserve Bank of India (RBI)-promoted National Payments Corporation of India (NPCI); accident insurance cover of Rs.100,000 (approximately $1,650); life insurance coverage of Rs. 30,000 for those opening accounts before January 26 (celebrated as Republic Day in India), and an overdraft facility of Rs. 5,000.
“Never before in economic history have 15 million bank accounts been opened in a single day,” said Modi. “Never before have insurance companies issued 15 million accident policies in a single day. Never before has the government of India organized a program of such scale — over 77,000 locations — with the participation of so many chief ministers, union ministers, and government and bank officials.”

ICICI, India’s largest private sector bank, opened only 100,000 accounts that day. “ICICI Bank has been working on a comprehensive financial inclusion plan over the past four years,” MD and CEO Chanda Kochhar told Knowledge@Wharton. “Through our network, we cover approximately 15,600 villages and have brought more than 18.5 million unbanked people into the banking fold. We aim to open 2.5 million accounts under the yojana, taking the total number of accounts under our financial inclusion program to more than 20 million.” As of September 8, major private sector banks taken together opened just 580,000 accounts.

Reasons for Concern
It remains to be seen whether the program will lead to big changes. “This is a small step and the take-up is encouraging,” says Wharton finance professor Krishna Ramaswamy. “It might lead to small and improved savings in an accountable and hopefully trustworthy way.”
The skepticism comes in part due to questions about the veracity of the numbers themselves. RBI governor Raghuram Rajan has publicly warned the banks not to run after records. “We have to make sure the Jan-Dhan Yojana does not go off track,” he said at a conference on September 15. “The target is universality, not just speed and numbers.”

According to H.K. Pradhan, professor of finance and economics at XLRI Jamshedpur, there are concerns of duplicate accounts from people who may have opened them “without really understanding what they were doing.” He adds that the issue will be sorted out when biometric identification is introduced. But there could be operational complications: Anybody in India can open multiple accounts, so how can there be a different rule for the currently unbanked?

The second — and more important — issue is that India’s problem of financial inclusion is gargantuan. According to World Bank data, only 35% of Indians have an account with a formal financial institution. This is 42% in the case of men and 27% for women. Only 8% have debit cards and 2% credit cards. According to the government’s 2011 Census, 58.7% households utilize formal banking services.

Rating agency Crisil, a Standard & Poor’s company, has a financial inclusion index called the Inclusix. The all-India Inclusix score is 40.1 (which mean that about 40% of the country has access to formal banking services). There are wide variations — from 62.2% in the southern region to 28.6% in the eastern region.

The high-powered Nachiket Mor committee on Comprehensive Financial Services for Small Businesses and Low-Income Households, set up by the RBI, found that 60% of the rural and urban population did not have a functional bank account. “India’s financial inclusion indicators, particularly in banking, put it below the median of countries, and bank accounts are a first step to inclusion,” says Rajesh Chakrabarti, executive director of the Bharti Institute of Public Policy at the Indian School of Business.

According to a report by global consulting firm Frost & Sullivan, India’s continued growth can only be assured “if steps are taken to ensure that social and economic development is inclusive.” Financial inclusion has moved into public consciousness only over the past decade or so. “Financial inclusion can no longer be treated as a fringe subject,” notes Jayanta Nath Mukhopadhyaya, director of the J.D. Birla Institute (department of management). “It has to be recognized as an important part of the mainstream thinking on economic development.”

The immediate challenge for banks, Pradhan says, will be acquiring the technology needed to facilitate more financial inclusion. “Moreover banks need to convert the old and dormant accounts into the new financial inclusion accounts in order to get the accident coverage and overdraft facility for the account holders.” This means that some of the work done on financial inclusion so far will have to be duplicated.

“There is much more to financial inclusion” than simply opening accounts, says M.S. Sriram, visiting faculty at the Centre for Public Policy at the Indian Institute of Management in Bangalore. “The state needs to put its resources to ensure that the infrastructure backbone is available — which means that there is ubiquitous presence of interoperable point of sale devices that allow people to transact without a hefty fee…. Once this architecture is available, the poor will start transacting.”
Chakrabarti adds that the government “seems to be fighting the symptoms rather than the disease. The point is for the formal banking system to be present when needed and be superior in convenience and efficiency. However, the approach taken seems to be to lure people into banking through incentives and to hope that the habit sets in. The trouble is that once the sweetener goes away, day-to-day banking provides little benefit in convenience to many users at the bottom of the pyramid.”

Long Road Ahead
The consensus of opinion is that Jan-Dhan is a worthwhile effort, but it’s too early to say whether it will succeed. “As compared to its predecessor — the Swabhiman scheme — this program has a high possibility of success due to two major strategic improvements,” states Rana Kapoor, MD & CEO of YES Bank and president of apex chamber Assocham. “First, it mandates provision of ATM-cum-debit cards to each account holder instead of the Smartcard [for thumbprint authentication] as earlier, where the customer was solely dependent upon agents or business correspondents. ATM debit cards give 24-7 access to savings, which is critical for the below-the-poverty-line population. The quantum of savings is limited and probability of emergency requirements is high.”

http://knowledge.wharton.upenn.edu/article/financial-inclusion-india-aims-move-beyond-bank-accounts/

Friday, September 12, 2014

Card payment network RuPay sees boost from government banking scheme



A government drive to expand banking services in India is giving a boost to home-grown card payment network RuPay, which expects to quadruple the number of users by March and make debit cards more acceptable in a nation where cash is still king.

Started in 2012 by a company owned by 10 local and foreign banks, RuPay competes with global payment firms Visa Inc and MasterCard Inc for the few customers in Asia's third largest economy able to afford a debit or credit card.

As of July, banks issued just under 435 million payment cards in India, a nation of 1.3 billion people. Most were debit cards.

RuPay's share of daily card transactions, however, remains small compared with the global firms, which are more established, offer both debit and credit cards and are accepted by more retailers. RuPay currently offers only debit cards.

RuPay users account for just 1.5 percent of daily card transactions of almost one million at retailers, said A.P. Hota, chief executive of the National Payments Corp of India (NPCI), which runs RuPay.

Hota told Reuters the payments network was set to grow rapidly from the government's so-called financial inclusion scheme, which aims to ensure the majority of households has a bank account within months.

Under the scheme launched late in August, Indians who open a bank account for the first time automatically get a RuPay card.

Hota said the number of RuPay users has now almost doubled  from 23 million at the end of July.

By March next year, he expects that number to rise to 160 million, with more than 60 percent of the increase coming from the government scheme.

"Jan Dhan itself would provide a big opportunity for the domestic card brand to be a formidable force," said Hota, referring to the financial inclusion scheme, Jan Dhan Yojana, which means People's Wealth Scheme.

"(RuPay Card transactions are) just a drop in the ocean at the moment. But drop by drop we are increasing our size."

NPCI is also trying to lure more customers by charging banks lower fees than Visa and MasterCard, Hota added.

Visa, the world's largest credit and debit card company, declined to give its India market share, but said the country was amongst the world's fastest-growing payments markets.

"We believe Visa is well-positioned competitively," Uttam Nayak, group country manager of India and South Asia, at Visa, said in emailed comments, adding his company welcomed competition.

MasterCard did not reply to Reuters' requests seeking comment.

NPCI's shareholders include India's biggest bank, the State Bank of IndiaBSE 0.93 %, and foreign lenders Citibank and HSBC. The central bank has a nominee on its board.

The organisation plans to launch RuPay cards that will be accepted overseas through a partnership with Discover Financial Services, Hota said, and is also in talks with Japanese card network JCB about a partnership.

RuPay had aimed to issue credit cards by March 2015, but those plans have now been delayed by the government scheme, Hota said. "Rural acceptance of the Jan Dhan cards will be our priority," he added.

Wednesday, September 10, 2014

Improving capacity is key to financial empowerment

A lot has already been said about the Jan Dhan Yojana; by the eloquent prime minister himself and then by advertisers, commentators and other worthies.In the crowd of messages, one called for urgent action. It said, 'Free accidental death insurance of up to Rs 10 lakh on your debit card has expired. Shop NOW to activate cover for the month.' I have no intention of dying to find out how much free insurance I am worth.

However, with the Jan Dhan Yojana fresh on my mind, I pulled out the plastic at the gas station, only to put it back because the two factor authentication required that I step out in the rain to punch my PIN at the handheld device, now irrefutably attached to the cashier's table!

I guess I am now without cover and I wish the new millions getting free insurance with their new debit cards better luck than that.

A lot has already been said about the Jan Dhan Yojana; by the eloquent prime minister himself and then by advertisers, commentators and other worthies. It is phenomenal as far as communication and intent goes. It warms the heart to know that the bullet trains will not bypass the small hapless woman, but that there is a plan to empower her in plastic and reward points.

It is difficult to argue with the potential of financial inclusion to significantly change lives and create long term, sustainable value. And yet, it will be a while before we know if the Yojana triggered or delayed financial inclusion.

Banks successfully opened 1.5 crore accounts on the launch day. However, achievement of numeric targets will not indicate success here as the entire value of the banking relationship is from ongoing use of the accounts. One hopes that low hanging fruits such as benefits transfers will be implemented efficiently by the government and banks will be able to manage BCs who in turn will be able to fulfill customer expectations.

But given the different agencies involved, it will be interesting to see who takes long term responsibility for actions, inactions and decisions made for and on behalf of banks, including potential credit and cost decision made for and on behalf of banks, including potential credit and cost decisions.

On their part, the central bank has been working at a furious pace to change the bank licensing framework to accommodate needs of an economy marked by small value, high frequency transactions.

The idea is that if supply side constraints are removed, old and new banks will compete and collaborate and test new, innovative, technology-driven distribution frameworks that will meet the demand side at a frameworks that will meet the demand side at a fair price, correcting a historical skew.
http://economictimes.indiatimes.com/opinion/comments-analysis/improving-capacity-is-key-to-financial-empowerment/articleshow/42138671.cms
In the crowd of messages, one called for urgent action. It said, 'Free accidental death insurance of up to Rs 10 lakh on your debit card has expired. Shop NOW to activate cover for the month.' I have no intention of dying to find out how much free insurance I am worth.

However, with the Jan Dhan Yojana fresh on my mind, I pulled out the plastic at the gas station, only to put it back because the two factor authentication required that I step out in the rain to punch my PIN at the handh ..

Banks to start with only Rs 500 overdraft under the Jan Dhan Scheme

Banks will be initially extending a lower overdraft facility under the Pradhan Mantri Jan Dhan Yojana lenders and not of Rs 5,000 which is the maximum amount under this scheme. Based on the credit history banks may later decide to extend the amount. The moves comes after the finance ministry clarifies that lower amount can also be extended under the overdraft scheme.

Under this scheme, on opening of a bank account holders are eligible for an overdraft facility of Rs 2,000 that can be extended up to Rs 5,000, based on the consumer's credit and transaction history. Apart from this account holders will also get a RuPay debit card with a Rs 1,00,000 accident cover. Also, customers who open accounts by January 26, will be entitled to an additional life insurance of Rs 30,000.

Bankers say that in order to avail the overdraft facility customers have been queuing up to open the accounts. However, a banker requesting anonymity explained that most banks are likely to start lending from a small sum of Rs 500 onwards instead of going for Rs 5,000 as seems to be the understanding amongst new account openers.

"Though banks have been given the leeway to extend overdraft facility on the basis of credit history but since the government is very aggressive on this plan, banks would not like to at least initially discourage too many customers for fear of a complaint. As a result we will start with small amount of up to Rs 500 in the first stage," said a banker with a public sector lender.

Another banker also echoed the reasoning for starting with smaller amount and explained, "There seems to be a  misconception amongst account openers under this scheme that they don't have to return the money. As a result, we think it is better to start extending a credit of smaller amount initially and that can later be hiked, said another banker.

Bankers explain that the overdraft facility had been misunderstood, as several account openers have understood that Rs 5,000 would be deposited in their accounts, as would the subsidies and freebies. And as a result it has become more important to start off with a smaller amount, say experts.
The government has been working on this scheme very aggressively and plan to achieve the target of opening 7.5 crore accounts in the country by January 26, 2015. In fact, on the very first day the banking sector had managed to open 1.5 crore accounts as part of this scheme.

Monday, September 8, 2014

Jan Dhan Yojana opens a new door for RuPay gateway

 

As Pradhan Mantri Jan-Dhan Yojana (PMJDY), the financial inclusion scheme launched by Prime Minister Narendra Modi late last month notches up impressive numbers and expects to meet its 7.5 crore accounts target well within 100 days, payment gateway RuPay is experiencing a boost in fortunes. 

Payment gateways are platforms that help banks facilitate electronic money transfers. India is only the fourth country in the world after the US, Japan and China to have its own national payment gateway, in RuPay. 

With the PMJDY getting nearly 2.5 crore new bank accounts within seven days of launch, each account holder gets a RuPay debit card along with his/her account.As a result, RuPay is notching up numbers. 

Fast-growing base

According to the National Payments Corporation of India (NPCI), which developed the platform, the RuPay card has a current base of 2.5 crore users and is seeing about seven lakh inter-bank transactions a day. 

With the financial inclusion scheme coming into play, the total number of RuPay card holders is likely to surge. NPCI will declare official numbers at the end of this quarter. 

AP Hota, Managing Director and CEO of National Payments Corporation of India Ltd (NPCI), told BusinessLine that the target for the year-end was six crore cards. By March 2015, RuPay may be able to add an additional 10 crore accounts. If the Centre’s financial inclusion scheme lives up to its hype, the sheer number of RuPay cards in the country will create a critical mass that will help create a huge network of retailers who accept RuPay cards. According to Reserve Bank of India statistics, the total number of credit cards in India is currently at around 1.9 crore while the number of debit cards issued is at 40 crore. Currently, global organisations such as Visa and MasterCard dominate this space. But Hota says competing with MasterCard and Visa is not a priority. “The perceived competition with MasterCard and Visa is not relevant at this stage. They are global companies with trillion-dollar revenues and deep pockets. We are a small company with ₹100-crore capital,” he said. 

Main challenges
The main challenges for RuPay are to get acceptance among the high-income bracket and to increase the number of transactions among those in the lower income bracket. Partner banks have an incentive to push RuPay to customers as transaction costs through this gateway are expected to be at least 40 per cent lower than through Visa and MasterCard.

Wednesday, September 3, 2014

Outlets everywhere, not many to bank on

 Is the existing banking infrastructure ready to take on the Jan Dhan Yojana load?
 
One of Rajesh Singh's friends went from Delhi to Birpur, a small town in Bihar's Supaul district bordering Nepal, with few hundred rupees and an ICICI bank debit card in his pocket to attend a family function. Being accustomed to the reliability of automated teller machines (ATMs) to dispense cash at any hour, he never worried about the expenses he was to incur at the function the next day. However, upon arrival at the small town, he got the shock of his life when he was told that all the three ATMs in the town were out of order and were going to remain so for the next few days.

"My friend had to ask his acquaintances to lend him Rs 25,000. I could sense that he was not comfortable, more so because he was not in a position to pay the money back quickly," said Birpur resident Rajesh, recalling the events of the evening he spent with his friend running around to arrange the money which could easily have been withdrawn from any of the ATMs. "My experience is that all the ATMs in and around Birpur rarely work," Rajesh added. And in places where they do work, cash runs out within minutes. "ATMs are stuffed with cash once a day, sometime around 10 am. And there is a long queue outside to withdraw money. Within 30-40 minutes ATMs run dry," said Avinash, a resident of Triveniganj, another small town in Bihar, 40 km from Birpur.

The problem is set to grow following issuance of 75 million new RuPay cards in the next six months with the launch of the Jan Dhan Yojana. In addition to the problem of long queues at ATMs, there would be the problem of guiding new cardholders, especially in rural and semi-urban areas, on how to use those cards, some bankers told Business Standard. "Biometric cards, though costly in the beginning, are very simple to use. And they mitigate the risk of theft or fraud. RuPay cards will entail a lot of guiding from banking staff to new customers. That may result in hiring caretakers at ATMs who will help customers. Then there is the risk of pin-based cards being misused," said a middle-level banker with a leading public sector bank.

Biometric cards prevent duplication, which is not the case with the RuPay card at the moment. "There is competition among branches to open accounts. With the Reserve Bank of India mandating that a single proof of identity is enough to open an account, people with multiple identity cards are opening multiple accounts. And all new accounts are being opened under the Jan Dhan scheme, irrespective of income category of the people opening them," said a banker with a public sector bank working in Delhi. People opening accounts were expecting higher insurance cover and overdraft with multiple accounts, observed another public sector banker based in Sagar, Madhya Pradesh.

According to Reserve Bank of India data, the country had 17,844 ATMs in rural areas and 19,327 ATMs in semi-urban areas at the end of March 2013. Most of these areas are served by state-run banks. And many of them face disruptions due to failure in satellite linkages and poor broadband connectivity. Bankers in charge of running the ATM network say that while in urban centres, faulty machines can be rectified in eight hours, the resolution takes seven to eight working days in remote locations.

On ATMs running out of cash, officials say banks earmark an amount for a region, which is revised only during the festival season. The amount has remained the same despite the number of customers and the size of the ATM network growing, they add. The country had a network of 95,686 ATMs at the end of March 2012. The number increased to 160,055 by March 2014.

A creaky ATM network is not the only problem in towns and villages. The sense one gets after talking to bankers and customers in states like Bihar, Uttar Pradesh and Madhya Pradesh is that the branch network, especially of state-run banks, too needs a major infrastructure lift. "Our branch is running without an electricity connection for a year now. There is a limit to how much service we can offer without basic facilities like regular power supply," said a branch manager with a leading public sector bank posted at a place 100 km from Bhopal.

As a result, customers end up spending a lot of time on services like withdrawing or depositing money. "I operate a current account in the main branch of Punjab National Bank in Hapur. There is such a rush that I spend a minimum of two hours to withdraw or deposit money," said Ajay Tyagi of Hapur in Uttar Pradesh. Then there is the problem of frequent disruption in broadband connection stalling transaction in branches for hours. "My uncle had to sell a piece of land and execute a sale deed in the registrar's office. He was in a real hurry as he does not stay here but needed money urgently. Before executing a sale deed you need to deposit money for stamp duty and other charges in an authorised bank and get the receipt. My uncle nearly missed executing the sale deed as the banking operation was disrupted that day because of a link failure," said Shekhar Chaudhary, a resident of Ganpatganj, a small town in Bihar's Supaul district. And link failure is a recurrent problem in many branches in small towns and villages.

While the bank network expanded by 18,346 in financial years 2011, 2012 and 2013, the country saw an addition of 108 million basic savings accounts in that same period. "The growth can be easily managed if alternative channels of banking work efficiently. However, because of poor financial literacy and consequent apprehension about alternative channels, many people like to visit branches for basic transactions," said the middle-level banker.

CHALLENGES IN INCLUSIVE PUSH
  • Poor satellite linkages and broadband connectivity for automated teller machines
     
  • Uninterrupted power supply mostly unavailable to run the machines
     
  • ATMs in rural and semi-urban areas tend to run out of cash soon
     
  • Guiding new RuPay card users to use ATMs
     
  • Higher risk of misuse and frauds due to lack of knowledge about ATM use
     
  • 7-8 working days to repair faulty machines in remote locations, against 8 hours in urban areas
 

Jan Dhan Yojana: Clarity awaited on insurance

So far, more than 25 million bank accounts have been opened under the Jan Dhan Yojana and all these individuals will be eligible for life covers of Rs 30,000 by LIC

 It might take time to offer life and accident insurance covers under the Pradhan Mantri Jan Dhan Yojana to those opening bank accounts under the scheme, as various issues in this regard are yet to be resolved.

Under the scheme, which seeks to open 75 million accounts by January 26, 2015, an accident insurance cover of Rs 1 lakh is provided with every RuPay debit card offered by the National Payments Corporation of India (NPCI).

NPCI officials said HDFC Ergo General Insurance would provide the accident cover under the scheme. This will cover accidental deaths, provided the debit card is swiped within 45 days of its issuance and is in an active state.

HDFC Ergo did not respond to a mail seeking details of the cover.

There is also a proposal for an additional accident cover of Rs 1 lakh for opening bank accounts within a stipulated period. While general insurance executives said state-owned general insurers would provide this, no official announcement or communication has been sent by the finance ministry to the companies concerned.

“Though this proposal was discussed in meetings with the finance ministry, it hasn’t issued any letter on when it would be launched and whether it would be completely free for customers,” said a senior insurance executive.

Sources said the general insurers selected for these covers were yet to receive any official communication from the ministry saying they had been selected for this and would have to make payments during receipt of claims.

While debit cards and insurance covers (at least a Rs 1-lakh accident cover) will be provided to all accountholders under this scheme, insurance officials say this might not be done immediately. An official said as the volumes were huge, they would be provided the complete kit within the next few weeks.

Further, the life insurance cover of Rs 30,000 is still being worked out, in terms of the premium collection, amount and the mode of payment.

Life Insurance Corporation of India (LIC), which will offer the cover to all individuals who open bank accounts under the financial inclusion scheme by January 26, 2015, has held a series of meetings with finance ministry officials on the collection of premia and administration of the scheme. A decision on the premium amount and the mechanism to pay claims is still awaited; a clarification is expected in the next three days.

So far, more than 25 million bank accounts have been opened under the Jan Dhan Yojana and all these individuals will be eligible for life covers of Rs 30,000 by LIC.

There have been talks of a minimal payment for this scheme by individuals. Also, the claim settlements could be through the Aam Aadmi Bima Yojana (AAMY), a social security scheme administered by LIC.

A life insurance cover wasn’t part of the Jan Dhan Yojana announced in Prime Minister Narendra Modi’s Independence Day address; it was announced on August 28, when the scheme was officially launched.

The scheme is expected to boost insurance penetration in India. Insurance penetration (premia, as percentage of gross domestic product, fell to 3.9 per cent in 2013-14, compared with four per cent in 2012-13, according to a Swiss Re sigma study). On the life insurance front, insurance penetration in India was 3.1 per cent; for non-life insurance, it was 0.8 per cent.

Tuesday, September 2, 2014

Banks open 2.14 crore accounts under Jan Dhan Yojana

The Finance Minister said that the target of opening up of 7.5 crore would be achieved before January 26, 2015. (Reuters)

Finance Minister Arun Jaitley today said banks have opened about 2.14 crore saving accounts since the launch of Jan Dhan Yojana on August 28.

"As of yesterday afternoon 1.84 crore accounts were added. Enrollment have continued...as of today afternoon about 2,14,34,000 accounts have been opened," he said.

The Finance Minister said that the target of opening up of 7.5 crore would be achieved before January 26, 2015.

The beneficiaries, who already have a bank account, are also eligible to take benefits of accident insurance of Rs 1 lakh and life insurance of Rs 30,000 under this scheme by getting a RuPay card issued from their bank branches before January 26, 2015.

Prime Minister Narendra Modi on August 28 launched the Pradhan Mantri Jan Dhan Yojna, a mega financial inclusion scheme, to cover about 7.5 crore unbanked households.

Under the scheme, a person from an unbanked household, opening an account will get a RuPay debit card with a Rs 1 lakh accident insurance cover. An additional Rs 30,000 life insurance cover will also be given if the accounts are opened till January 26, 2015.

Speaking about the scheme, Financial Services Secretary G S Sandhu said Rs 1 lakh accident insurance with the RuPay debit card is free to customer.

However, he said the premium on Rs 30,000 life insurance cover would be part paid by beneficiaries for which department is working out modalities.

The new scheme is an improvement over the UPA's financial inclusion programme.

The earlier scheme had no focus on households and no emphasis was given on urban financial inclusion, some experts said. Besides, they maintained that there was a cumbersome Know Your Customer formality, restricting account opening.

Other deficiencies cited included lack of credit disbursement and 47 per cent of business correspondents being untraceable, resulting in inactive accounts.

The new scheme has tried to address all the possible deficiencies and its monitoring would be done at state and district levels.

The 'mission mode' approach has been envisaged with the Finance Minister as head of the mission.
The mission will have five different levels for overseeing the implementation of the programme, three with the Centre and two with state governments.

The programme assumes importance as 42 per cent of the population is still out of the formal banking system, and has to depend on money lenders for meeting their credit needs.
The present banking network of the country comprises



Monday, September 1, 2014

Jan Dhan Yojana: Many questions remain

The government's financial inclusion scheme, Pradhan Mantri Jan Dhan Yojana, is an empty shell at the moment. The government heralded its achievement of clocking 15 million new bank accounts under the scheme by Thursday and looked ahead to the target of achieving 75 million accounts by January 2015.

In fact, given that the UPA government added an additional 60.9 million accounts in 2013-14, the target is an easy one. The real challenge is of keeping the accounts alive, funding the overdraft mechanism and ensuring confusion over the insurance cover is resolved.

A meeting on Monday in the finance ministry could  resolve some of the make-or-break problems of the grand scheme. The finance ministry will try to resolve the confusion created over the account-linked accident insurance the government has already announced. Other components of the Jan Dhan scheme too are yet to be fleshed out. Each of the new bank accounts is to come with a RuPay debit card, a Rs 5,000 overdraft facility, a Rs 1 lakh accident insurance and Rs 30,000 life insurance. Keeping these accounts running, the insurance-claim system functional, funnelling money through cash transfer mechanisms and making the overdraft facilities financially viable will imply costs for different financial sector actors. Or, more likely, for these costs to be subsidised by the government.

PROBLEM AREAS
  • Accident insurance cover Meeting on Monday to resolve confusion
  • Funding the banking correspondent model finance unclear. 248,000 correspondent agents in country
  • Cost of overdraft facility No clarity on who shall bear the cost
  • Existing saving accounts without RuPay card not to get other benefits
  • Creating new accounts not a challenge, increasing transaction per account is

k done earlier for the direct benefit transfer and financial inclusion schemes. But this is really several schemes rolled into one over phases and we will have to sort the fine details," said a senior official in the government.

The immediate challenge for the government will be to figure out the financial viability of maintaining the accounts and the linked insurance schemes. The RBI-promoted National Payments Corporation of India (NPCI) which offers the RuPay card, had already given the contract for accident insurance to HDFC Ergo for a period of three years. But this insurance was linked to the transaction history of the accountholder. The industry was led to believe there would be an insurance top-up by the government on this of Rs 1 lakh, costing NPCI Rs 1 per customer every year.

NPCI plans the insurance cost from the income generated out of transaction on the RuPay platform.

For every ATM transaction the issuing bank pays NPCI 40 paise. For every point of sale or ecommerce transaction NPCI gets 60 paise from the issuing bank and 30 paise from the accepting bank. All existing RuPay debit card holders would be able to avail of this facility, sources told Business Standard but not those holding saving accounts without the RuPay card. The card itself will cost about Rs 50 each roughly, though the scale could bring down costs marginally, sources said.

A former banker also noted that the financial viability of running these millions of accounts would depend on the minimum balances maintained and the number of transactions carried out in a year. A source in the government said earlier assessments suggested that out of the 180 million bank accounts opened under the financial inclusion scheme so far, a vast majority sat dormant or unused once they were opened. The RBI also noted that even as the volume of accounts had increased substantially keeping the transactions flowing remained a challenge. In other words, the banking inclusion system generated empty accounts to meet set targets.

Aadhaar not mandatory to open bank account under Pradhan Mantri Jan Dhan scheme

Beneficiaries display their RuPay cards during the launch of the Pradhan Mantri Jan Dhan Yojana in Chennai on Thursday.

Account openers will get a RuPay Debit card with an in-built accident insurance cover of Rs.1 lakh and a pass-book immediately.

Opening a savings bank account just got easier and faster. With the launch of Pradhan Mantri Jan Dhan Yojana, customers can walk into a public or private sector bank with their Aadhaar card and open a zero-balance SB account instantly. But Aadhaar is not mandatory. A National Payment Corporation of India platform is being built to enable customers to access their accounts on mobile devices. 

Account openers will get a RuPay Debit card with an in-built accident insurance cover of Rs.1 lakh and a pass-book immediately. An additional Rs. 30,000 life insurance cover will be offered for those opening the accounts before January 26, 2015. Also, an overdraft facility of up to Rs. 5,000 will also be permitted for Aadhaar-enabled accounts after satisfactory transaction in the account for six months. 

However, Aadhaar is not mandatory for opening the account under this scheme.A technical platform has been built by National Payment Corporation of India to connect all banks and telephone network operators in the country. The platform is being built to enable customers to access their accounts on any mobile handset.

Jan Dhan Yojana: Government loads up RuPay with Rs 30K LIC cover plus Rs 1 lakh accident insurance

%20%28The%20massive%20financial%20inclusion%20will%20give%20unbanked%20customers%20RuPay%20debit%20card%2C%20along%20with%20free%20insurance%20cover%20and%20new%20bank%20account.%29

RuPay cardholders will have dual insurance covers, with the government roping in the Life Insurance Corporation of India a day before unveiling its financial inclusion programme Pradhan Mantri Jan Dhan Yojana.

LIC, the country's largest financial institution, will offer a life cover of Rs 30,000 while HDFC Ergo will provide a Rs 1-lakh personal accident cover to RuPay cardholders.

The massive financial inclusion project to be launched across India on Thursday will give unbanked customers RuPay debit card, launched by the National Payments Corporation of India (NPCI), along with free insurance cover and new bank account.

NPCI had entered into a three-year agreement with private general insurance HDFC Ergo and a similar agreement will be signed with LIC.

Senior officials said the government had decided to improvise the scheme by providing additional insurance cover. The government approached LIC after first picking the state-owned general insurance company New India Assurance for providing additional cover of Rs 1 lakh.

"After a day-long meeting with senior officials from government-owned banks, NPCI, LIC and government-owned general insurance companies on Wednesday evening, LIC was asked to provide additional insurance cover to RuPay cardholders," said a finance ministry official, who did not wish to be named.

LIC will provide unconditional cover to RuPay cardholders. HDFC Ergo will provide cover to the cardholders in case of death or permanent disability. As per the agreement between HDFC Ergo and NPCI, a claim will be disposed only if the card is active. A card will be considered active if the cardholder has swiped it within 45 days of making a claim. The NPCI is in talks with HDFC Ergo to improvise the scheme so that the claim can be made if the card was swiped within the preceding 90 days.

The NPCI has issued 23 million cards, and it is estimated that 150 million new bank accounts will be opened and as many new cards will be issued in the unbanked areas by March 2016, with the NPCI paying the premium instead of the cardholder.

The Jan Dhan Yojana aims to cover 60% of the country's population that does not have access to formal banking services. Under the scheme, every household will be provided one bank account within a year.

PM Modi wants to take RuPay cards to global level



Aiming to take 'RuPay' cards to the international level, Prime Minister Narendra Modi today said the success of financial inclusion scheme Jan Dhan Yojana will pave way for its global acceptance.

Under the Jan Dhan scheme launched today, banks will provide every account holder a 'RuPay' debit card with inbuilt Rs 1 lakh accident insurance.

 "... We are all aware globally about the popular Visa Card. Should we not also aspire that our 'RuPay' card becomes acceptable all over the world? Should it not also have the same credibility? After today's event, it looks like there is full possibility," Modi said after inaugurating the scheme.

The RuPay platform — developed by National Payments Corporation of India (NPCI)— is already being used by certain banks like ICICI, State Bank of India, Punjab National Bank, among others, for clearings and settlements.

RuPay, which works on three channels — ATMs, Point of Sales (POS) and online sales, is the seventh such payment gateway in the world.

With crores of poor people getting access to 'RuPay' debit cards, the divide between the rich and the poor will be bridged, he said, adding "like the rich people uses the debit card, now the poor too will have debit card."