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.