Showing posts with label PMJDY. Show all posts
Showing posts with label PMJDY. Show all posts

Monday, November 9, 2015

Add-on insurance edge for RuPay



The National Payments Corporation of India (NPCI), which developed the country's home-grown card payment system RuPay, has attributed the system's rapid growth to the insurance cover it provided to its card-holders.

Rupay, which became operational from 2012, have rolled out 206 million cards (as of September-end), acquiring a sizeable market share within a short time.

Of the 206 million cards, 160 million is for bank accounts opened under Pradhan Mantri Jan Dhan Yojana (PMJDY).
"The opportunity was given because of RuPay's inherent strength," said A.P. Hota, CEO and managing director of NPCI.
"The government had weighed and evaluated all card payment systems. At that time, the RuPay card had an inbuilt accident insurance of Rs 1 lakh. When the PMJDY scheme was launched, it was thought that along with the opening of accounts let people have an access to accident insurance. Then (Jan Suraksha) insurance schemes were not present. So, the government chose RuPay by its intrinsic strength," Hota said.

RuPay competes with Visa and MasterCard in India.

Hota said NPCI's non-profit characteristic was another factor behind its growth.

"NPCI is not a profit-making company. All operational benefits go to the same banking community who pays the fees," he said.

Hota said the revenue stream from its different verticals - card payment, Aadhar-based services and mobile-based interbank immediate payment service (IMPS) - were adequate to fund the introduction and upgradation of the payments technology.

Mobile payments

NPCI is working on upgrading and simplifying the existing IMPS system, which is likely to take shape by January.
"In IMPS you can send money instantaneously. But suppose one would like to collect money instantaneously. That would be possible in the new system. We have also tried to dissociate authentication and identity verification. Registration formalities have been tightened. Also, the payment processing service provider is not necessarily your bank. An account can be with one bank but the transaction routing can be through another bank," Hota said.

Eleven banks, including Union Bank, United Bank of India, Bank of Baroda, HSBC, HDFC and ICICI have shown interest in participating in the project. NPCI is also in talks with the SBI, which has the largest bank network.

"This requires regulatory clearance. For the last 45 months we have been in touch with the regulator and are clarifying their questions. We hope to secure approval soon. We will start with a few banks and expand gradually," he said.
NPCI is in the process of bringing in district co-operative banks and regional rural banks under the IMPS network.

RuPay forces MasterCard to call for fair competition


Facing stiff competition from India's own payment gateway RuPay, MasterCard has called for a level-playing field to stay put in the Indian market.

"It is great that the government is opening up the market. But the market should be driven by competition rather than mandate-driven competition," said Ravinder S Aurora, MasterCard group head and senior vice-president.

RuPay, which is run by the National Payments Corporation of India, gained traction in the local market ever since banks started opening accounts under the Pradhan Mantri Jan Dhan Yojana. 

About 154 million RuPay cards have been issued to new non-frills account holders under the PMJDY programme, to add to the 40 million existing RuPay debit cards with regular bank customers. Ru-Pay, which was conceptualised by the Reserve Bank of India in 2009, has cornered about one-third of the market with a of 580 million. China has a similar indigenous card called the Union Pay of China. 

To thwart competition, Aurora said that MasterCard is focusing on innovation and advanced technology for better security features. Not too long ago, MasterCard and Visa Card were predominant in the Indian market, which is now almost equally shared by RuPay and the two global payment solution providers in terms of number of cards issued. 

Bankers said that issuing RuPay cards is cost-effective for them as the fees associated with it is typically lower than the charges levied by Visa or MasterCard. Aurora said that about 10% of MasterCard's global business comes from India. It had invested $250 million in India last year.

It has tied up with E-lala, the ecommerce portal being promoted by Confederation of All India Traders. 


Monday, September 14, 2015

One year of Jan Dhan: Many loose ends yet to be tied

One year of Jan Dhan: Many loose ends yet to be tied

Paramjit Kaur, a resident of Salempur village in Punjab's Ludhiana district, can barely hide her excitement when asked about the launched last year. She was one of the first women from her village to open what she calls the "zero balance" account. And she is one of the lucky few to have a passbook.

The entries, all in English, show her as a student (she is actually a home maker) and that she has not made a single transaction since the account was opened on August 28, 2014. Her father's name is given in the column for wife and the nomination column says "not registered".

All the people this reporter spoke to in the village had opened "zero balance" accounts. Few of them received passbooks. None has received a yet. They were not aware of the benefits of the scheme and did not know about the conditions to claim them.


The situation was no different in the neighbouring Humbran village where 55-year-old enrolled himself for the scheme and has a passbook. But he, too, has not made a single transaction and is yet to receive the RuPay card, making him and others like him ineligible for the overdraft facility and accident and life insurance benefits that come with these accounts.

According to the details of the scheme, an account holder becomes eligible for an overdraft of up to Rs 5,000 only after satisfactory operation of the account for six months and the RuPay card that comes with the account has an inbuilt accident insurance cover of Rs 1 lakh. According to government data, 179 million accounts were opened under the scheme till August 26, 2015. However, only "10 lakh (one million) accounts have been found eligible for overdraft. Out of these, the overdraft facility has been availed by 164,962 account holders."

The sense one gets after talking to a number of bankers is the scheme, though laudable in its objective, is suffering because of procedural complexities. "Since most of these accounts were opened in a great hurry and at organised camps, many entries need to be checked and rechecked. The feedback I receive is that entries, at least in 60-70 per cent cases, with regard to nomination just do not exist. In such a scenario, how can insurance claims be settled?" asked a middle-level banker with a leading public sector bank posted in Ludhiana.

Bankers say the reason so few account holders are eligible for overdraft is many of them have not strictly followed the know-your-client (KYC) norms. Non-existence of mandatory transactions within 45 days of the opening of the account is another reason. "We sent RuPay cards to addresses given by the customers. A majority of them came back to us as those addresses just do not exist. It is a huge problem for us," a Delhi-based banker with another government-owned bank told this reporter.

Bankers also say that since other schemes like the Pradhan Mantri Suraksha Bima Yojana, Pradhan Mantri Jeevan Jyoti Bima Yojana and are linked with Jan Dhan accounts, their success will depend on how the loopholes in the Jan Dhan accounts are plugged. "Suppose the premium for any of these schemes is to be deducted from the Jan Dhan account. If there is no transaction and hence no balance, how will the premium be deducted?" observed another banker.

Lack of awareness about the scheme, especially in villages, has created a situation where expectations are turning into disappointment. "All the workers who work in my field had opened Jan Dhan accounts. Once in 15-20 days they go to bank branches to check whether they have received some money. Once they get to know that no amount has been credited, they come back thoroughly disappointed," Jagjit Singh, sarpanch of Chankoin Khurd village in Ludhiana district, told this reporter.

(Our experience with how the Jan Dhan Yojana has unfolded in some villages in Ludhiana district raises questions about the sustainability and effectiveness of the financial inclusion scheme. We must, however, make it clear that we have not conducted an all-India survey, but base our observations on discussions with a few villagers in Ludhiana, selected at random, and a few bankers. The picture may be different in other parts of the country.)


http://www.business-standard.com/article/economy-policy/one-year-of-jan-dhan-many-loose-ends-yet-to-be-tied-115091200834_1.html

Wednesday, August 26, 2015

India's RuPay breaks Visa and MasterCard's grip

http://www.hindustantimes.com/Images/popup/2015/8/19_08_15-metro13.gif

Hiding behind Prime Minister Narendra Modi’s high-decibel financial inclusion push is a rather unnoticed growth story: RuPay, India’s own payment gateway.
About 190 million, or one in three of the total 580 million debit cards currently in use in India are RuPay cards.
Clearly, the Pradhan Mantri Jan Dhan Yojana (PMJDY) have given a head-start to a one-year-old card system that now stands almost shoulder-to-shoulder with global peers such as Visa and MasterCard in India, at least in user volume. And it has its own advantages (see graphic).
Modi launched the Jan Dhan scheme in August last year, with the promise to end “financial untouchability”.
So far, more than 175 million accounts, which come with a RuPay debit card and an overdraft facility of Rs 5,000, have been opened under the scheme.
Already 154 million RuPay cards have been issued to these new non-frills account holders. Banks have also issued another 40 million RuPay debit cards to “non-Jan Dhan” customers.
“We are now focussing outside the PMJDY and promoting these RuPay cards even to other savings account holders,” AP Hota, MD and CEO, National Payments Corporation of India (NPCI), which runs RuPay, told HT. “Until one year ago MasterCard and Visa Card were predominant in the market while now RuPay has made a mark and we are hoping to increase its presence further.”
MasterCard said Indians are fast adopting digital payment technologies. “There is plenty of room to grow in this segment,” said Vikas Varma, executive director, South Asia, MasterCard.

“Low personal consumption expenditure penetration presents a significant opportunity for electronic payments growth, in line with the government’s less- cash society vision,” said TR Ramachandran, group country manager, India and South Asia, Visa.
NPCI’s nine promoter banks include State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union Bank of India, ICICI Bank, HDFC Bank, Citibank and HSBC.
For RuPay, which the RBI first conceptualised in a vision paper in 2009, making it more acceptable in retail merchandise and e-commerce transactions, and globally remain key challenges.
China has a similar card called the Union Pay of China.
Indian Railway Catering and Tourism Corporation (IRCTC), billed as India’s biggest e-commerce site, has launched a RuPay pre-paid card that allows railway passengers to book tickets, shop and pay service bills.
NPCI has tied up with Discover Financial Services and Japanese card network JCB for international acceptance of its cards.

RuPay card to soon overtake Visa-Master cards in India?

  RuPay card to soon overtake Visa-Master cards in India?

RuPay, the foster child of Pradhan Mantri Jan Dhan Yojana (PMDJY), is the new payment getaway card in India breaking the long grip of Visa and Master in the card market. And it only looks to increase over the years.

It is interesting to note that, of the 580 million debit cards used in India, 190 million are said to be RuPay card, a huge achievement for a year old card.

The Jan Dhan Yojana, which was launched by Prime Minister Narendra Modi in August 2014, has over 175 million accounts (17.5 crore) as of August 2015.

While 154 million RuPay cards have been issued to the account holders under the PMJDY, banks are also said to have issued 40 million RuPay debit cards to 'non-jan-dhan' accounts.

Having grown so mcuh within a year, the RuPay card is said to have broken the grip of the Visa-Master grip of the card market.

“Untill one year ago MasterCard and Visa Card were predominant in the market while now RuPay has made a mark and we are hoping to increase its presence further”, AP Hota, MD and CEO, National Payments Corporation of India (NPCI) which runs RuPay to Hindustan Times.

The NPCI is likely to launch RuPay credit cards by March next year, as per report in HT.

Moreover, NPCI is also said to have tied up with Discover Financial Services and Japanese card network JCB for international acceptance of the RuPay cards.

With the increasing credibility and importance of the card, the Indian Railway Catering and Tourism Corporation (IRTCT) has also launched a RuPay pre-paid card which allows passengers to book tickets, pay service bills or shop.

Friday, June 12, 2015

Banking on the RuPay

The recent Jan Dhan Yojna has given RuPay a big boost as every account-holder is getting the RuPay card.

 

NPCI had brought to life RuPay debit cards in 2012.

It was recently revealed by the National Payment Corporation of India (NPCI), a government agency, that RuPay-branded credit cards would be launched in less than 10 months from now. Lalatendu Mishra and S. Varadharajan have this explainer on RuPay: 

What is RuPay?
RuPay is India’s own card payment scheme. Like all other card payment schemes, notably Visa and MasterCard, it was created to ensure cashless transactions. The scheme was conceived by NPCI, an initiative of the Reserve Bank of India and an umbrella institution for all retail payment systems in the country. 

Why the name RuPay?
RuPay is a play of the words rupee and payment. It was originally called IndiaPay. 

So, you can do with RuPay what you can do with other cards?
Yes, you can use them at ATMs, as well as while shopping both online and offline. 

How does any card system work?
Imagine you are paying for your grocery purchases at a supermarket using your card. When your card is swiped, the seller’s bank submits the transaction through a card payment network (the likes of Visa or RuPay) to the bank that issued your card in the first place. The card payment network forms the middle layer connecting the card issuing bank and the seller’s merchant bank. 

When there are other such systems already, why one more in the form of RuPay?
RBI wants to back a domestic card system with a few goals. One, provide affordable electronic transactions for local banks. Two, promote financial inclusion. The idea of a domestic card is to break the dominance of international majors such as Visa and MasterCard.
The website of NPCI also lists as a benefit the fact that transaction and customer data of RuPay users will stay in India. 

Where are RuPay cards accepted?
They are accepted at more than one million points of sale terminals. Over 20,000 online merchants accept RuPay cards. Internationally, RuPay cards can be used at all Discover & Diner PoS and ATM networks. 

How affordable are RuPay cards for banks?
Banks pay higher transaction fee in case of foreign cards such as Visa and MasterCard. Since the transaction processing of RuPay happens domestically, it leads to lower cost for clearing and settlement of transactions. According to NPCI officials, the cost is around one-third of the fee charged by foreign card brands. 

How much does NPCI charge for use of RuPay?
For use at ATMs, banks are charged 45 paise per transaction and 90 paise per transaction at point-of-sale in merchant establishments or e-commerce platforms, irrespective of the transaction value. Other card systems charge more in case of high value transactions. 

What is RuPay's market share in India?
According to information in the Finance Ministry’s website, around 14 crore RuPay cards have been issued till date. Out of the 50 crore debit cards and two crore credit cards in circulation, this works out to about 27 per cent. And, this number has been achieved in less than three years. Out of the 14 crore cards issued, 55 per cent are active, according to Finance Ministry data. The recent Jan Dhan Yojna has given RuPay a big boost as every account-holder is getting the RuPay card. The direct benefits transfer scheme has also helped in making the RuPay cards active.

Wednesday, March 4, 2015

Govt forms panel to suggest ways on promoting Rupay card transaction

The government has formed a committee which will come out with structures that can be put in place to encourage use of credit or debit cards, Finance Secretary Rajiv Mehrishi said today.

"We have formed a committee to look at what are the best ways to incentivise use of credit or debit cards ... The committee will look at what structures can be put in place to encourage use of credit or debit cards," Mehrishi told reporters here.

Finance Minister Arun Jaitley in his maiden full-year Budget had said the government will announce incentives to encourage card usage by consumers to curb black money flow into the system.

"One way to curb the flow of black money is to discourage transactions in cash. Now that a majority of Indians has or can have, a RuPay debit card, I, therefore, propose to introduce soon several measures that will incentivise credit or debit card transactions, and disincentivise cash transactions," Jaitley had said .

Elaborating further, the Finance Secretary said, "Several things are in considerations, for example incentivising banks ... You know there are transaction costs which government can perhaps share."

"But there are also otherwise, you know what I would say to disincentivise cash transaction, any expenditure by a person in a five star hotel above Rs 5,000 have to be settled using credit card, there can be also decisions like that."

Till January 31, over 11 crore Rupay cards have been used under Pradhan Mantri Jan Dhan Yojana. This will definitely help banks to encourage customers to go digital with their transactions.

Monday, February 2, 2015

Uttar Pradesh farmers to get 4.2 mn RuPay credit cards




and (RRB) would issue over 4.2 million Kisan Credit Cards (RuPay KCC) to farmers across the state.

National Bank for Agriculture and Rural Development (NABARD) has sanctioned Rs 30 crore to these financial institutions for the purpose.

RuPay KCC is a smart card used by farmers at automated teller machines (ATM) or point of sales (PoS) machines, where it could be swiped for withdrawing cash or making payments. It does away with the necessity of visiting Primary Agriculture Cooperative Societies (PACS) or bank to operate the account.

Under the project, has extended support of Rs 19 crore and Rs 11 crore respectively to all seven RRBs and 15 cooperative banks operating in the state.

To ensure doorstep delivery of banking services to farmers, NABARD has also supported these financial institutions to deploy over 11,000 micro-ATMs/PoS machines at all their branches.

Recently, NABARD UP region chief general manager K K Gupta had convened a meeting to review progress made under the scheme. Advising banks to improve implementation of the project, he said NABARD would provide assistance of Rs 5 crore to cooperative banks in setting up over 100 ATMs in rural areas and utilising PACS as their Deposit Mobilising Agents.

NABARD support for technology adoption in cooperative banks and RRBs would benefit not only farmers, but also rural populace in general, who have opened accounts under Pradhan Mantri (PMJDY).

Besides, NABARD has supported cooperative banks and RRBs to set up 189 financial literacy centres in rural areas of UP with grant of over Rs 8 crore for disseminating information and creating awareness on various financial products and services.

Sunday, January 11, 2015

FM: Benefits of Demographic Dividend will flow only if our Population is Healthy, Educated and Properly Skilled

Meets Representatives of Social Infrastructure, Human Capital and Development Groups as Part of his Pre Budget Consultative Meeting

The Union Finance Minister Shri Arun Jaitley said that apart from on-going schemes and programmes for the marginalized and vulnerable section of the society, the Government has initiated various special social sector programmes. He said that these programmes among others include Swacch Bharat Mission (Gramin), which will set the base for improving sanitation and health standards; Pradhan Mantri Jan Dhan Yojana (PMJDY) and RuPay debit card which will extend financial inclusion and give financial empowerment to the account holders at large.

The Finance Minister, Shri Jaitley was making his Opening Remarks during the Pre Budget Consultative Meeting with the representatives of Social Infrastructure, Human Capital and Development Groups. He said that more than 63% of the population is in the age group of 15-59 years, broadly termed as India's demographic dividend. He said while this young population provides India a great opportunity, but it also poses a great challenge to the Government. He said that benefits will flow only if our population is healthy, educated and properly skilled. In this context, he said that investments, especially in social infrastructure that build-up human capital are crucial. Shri Jaitley said that India needs to take advantage of this demographic window in the next couple of decades and garner its benefits.

Therefore, the Finance Minister said that his Government has put thrust on skill development as well as on 'Make in India' as the Government's endeavour to improve employability and create large employment avenues for the youth among others. He said that skill development has been given focused attention for which a dedicated Department of Skill Development and Entrepreneurship has been created in the Central Government. He said that the challenge for the country now is in planning and acting towards converting its potential demographic force for enhancing opportunities of growth by dovetailing the quality of manpower to the requirements of employers, both domestic and international.

The Union Finance Minister Shri Arun Jaitley said that emerging trends indicate the growth deceleration in India has bottomed-out. The Finance Minister said that significant downward trend in inflation has also been recorded in the second and third quarter of 2014-15. He said that external environment has also largely turned in India's favour. In such a back drop, the Finance Minister said that domestic policies to achieve macro-economic balance and the on-going process of economic reforms would lend further strength to the recovery of the economy.

Various suggestions were received from the representatives of the different social sector groups during the meeting. Major recommendations include that immediate steps be taken in the budget to prevent any scope of diversion and misallocation of funds meant for the benefit of dalits and adivasis. This will result in about Rs. 30,000 crore to be available for the development of Scheduled Caste and Scheduled Tribes. Other suggestions include to set apart in the coming budget the entire 16.2% for Scheduled Castes and 8.2% for Scheduled Tribes, establishment of well designed and dedicated institutional mechanism for Schedule Caste Sub Plans (SCSPs) Tribal Sub Plans (TSPs) separately at the Centre and State levels, creation of a separate unit within Niti Ayog with power to review, monitor and direct to ensure effective implementation of the SCSP and TSP as well as setting-up of a nodal unit headed by a Joint Secretary with the responsibility of preparation of Annual SCSP Plans and their subsequent implementation.

Other suggestions include adequate allocation for ICDS budget, Mid Day Meal Scheme and for the programmes for the nutrition of mother and child under Food Security Act as well as clear demarcation of funds to remove malnutrition among children of dalits and adivasis etc. Besides this, there was suggestion for budget transparency at local level in order to have better utilization of funds and results of various social welfare schemes at the grass root level etc.

Other suggestions made during the aforesaid meeting include that a mechanism needs to be built to develop entrepreneurship among dalits, schemes to be brought out for developing art and culture of dalit and adivasi communities. Suggestions were also made about proper implementation of Prevention of Domestic Violence against Women Act, appointment of women protection officers, increasing the scope of Nirbhaya Fund to cover the domestic violence against women etc. A suggestion was made that Finance Minister may include a statement in his Budget Speech condemning violence against women showing unequivocal commitment of the Government in this regard.

Some suggestions were also made on investment on youth, especially from those of socially excluded communities, investment in skill and entrepreneurship building, more spending on education and social enterprises, inclusion of youth leadership in CSR activities, higher spending to change the social mindset of people against the use of toilets etc.

Other suggestions include adoption and implementation of the National Competition Policy to push the growth on higher trajectory, adoption and implementation of Public Procurement Act. As public procurement accounts for almost 30% of the total GDP worth US $136 billion annually, therefore, Public Procurement Act would help in promoting the good governance by curbing corruption in public procurement; and adoption of a National Public Procurement Policy; adoption and implementation of Financial Consumer Protection Act, fixing of fiscal management practices by establishment of Parliamentary Budget Office, adoption of international best practices in budgetary planning and reduction of non-merit subsidies among others.

In end, suggestions were also made for enhancement of allocation to education with an emphasis on making functional investment in early childhood and elementary education, enhanced allocation to education to 6% of GDP in line with Kothari Commission and National Education Policy recommendations and enhance allocation to elementary education by 1% to accommodate a cumulative gap in education, enhanced allocation to areas with strongest implications on quality-availability of teaching learning materials, improved libraries and strengthening of the capacity of the resource unit at the cluster level, enhance allocation for research, monitoring and evaluation, address gaps in financial and planning process to ensure full expenditure of allocated funds in education sector among others.

Sunday, January 4, 2015

To ensure high growth trajectory, Narendra Modi government to overhaul banking sector

The Narendra Modi government is embarking on an overhaul of the banking sector to ensure it lends support to country's move towards high growth trajectory. With public sector banks performance lagging behind their private peers on key indicators, the government wants to urgently draw up a reform roadmap that could include revamp of priority sector lending, consolidation and effective use of technology for lending and greater financial penetration.

"...There is a wide disparity in various performance indicators of private and public sector banks and in this context there is a need to rethink on the strategy of PSBs...When the country is trying to achieve accelerating growth of economic development, it is absolutely essential that banking reforms are thought about, deliberated about," Hasmukh Adhia, secretary, department of financial services, said here on the first day of 'Gyan Sangam', banking retreat organized by the finance ministry.

For example, return on total asset by private sector banks is 1.6% compared to just 0.5% for public sector banks. Gross non-performing asset ratio of public sector banks is over 5%, while private sector banks' is pegged at little over 2%.

On all other indicators also private sector banks have shown a better performance that their public sector counterparts.

Prime minister Narendra Modi, finance minister Arun Jaitley, minister of state for finance Jayant Sinha and RBI governor Raghuram Rajan will attend the two-day bankers retreat in the lush green campus of National Institute of Bank Management on the outskirts of the city.

The retreat will attempt to draw up a "concrete" action plan to re-inviogarate the sector, grappling with mounting bad loans.

".... banks and financial institutions are the backbone of the economy. Stronger the bank and financial institutions, stronger would be the growth of the economy," Adhia said adding that the deliberations over the next two days would also focus on the recommendations given by various committees in the past, non-performing assets and credit off take.

Adhia said bankers participating in the retreat had been divided into six working groups to assess issues and draw up plans to be presented to Prime Minister after discussion with finance minister and RBI governor.

External experts including, KV Kamath, ICICI Bank chairman, P J Nayak, ex-CMD, Axis Bank, Paresh Sukhantkar, DMD, HDFC Bank and Bandhan founder Chandrashekar Ghosh have been roped in from the private sector help bankers draw on their skills.

Framework would be drawn up for achieving universal financial inclusion, leveraging technology to improve efficiency, re-thinking priority sector lending, improving risk management, asset quality and recovery, consolidation and restructuring of PSBs and building robust people strategy.

Adhia said risk management and asset quality was a problem area for banks and the government wanted to help them manage it in a better way while pitching for a change in priority sector lending norms that has remained at 40% since 1969 when the guideline was introduced.

"We would like to generate ideas on what could be the priority sector prescription for the banks in view of the present state of the economy...At the moment banks have to lend 40%of their total credit to priority sector which include agriculture loan, loans to minority.., Adhia said adding that the overall economy has seen a major shift from 1969. For example food processing would be very important for agriculture growth, but does not feature on the priority sector lending items, he pointed.

Adhia said consolidation in banks did not necessarily mean only mergers and acquisitions.
"If we have to give better support to banks, if the banks have to play a complimentary role, can we think of some other structures by which it is easy for the banks to manage their affairs, it is easy for them to get capital from the market and it is easy for them to improve the balance sheets," he said. On the issue of financial inclusion, the financial services secretary said that the focus of group discussions will be on how to keep these accounts active and improve the savings rate of the country from 30% to 35% of the gross domestic production (GDP).

"We will be looking that how other financial products such as pension and insurance can be linked with these accounts," he said. Under the government's ambitious financial inclusion scheme, Pradhan Mantri Jan Dhan Yojna (PMJDY), banks have opened around 10.3 crore accounts and 98.4% of the households have been covered.

"We are also seeding these accounts with Aadhaar number and around 33% of the accounts have been linked," said Adhia, adding that Rupay card have been provide to 80% account holders.

The retreat is being held to take forward the government's commitment to reforms in the financial sector, the finance ministry said in a statement. "The growth and change in financial sector ought to be in tune with the development in the real sector," the statement said.

10 crore Jan Dhan accounts, 73% zero balance

PUNE: The government on Friday said that banks had gone past the target of opening 10 crore Jan Dhan accounts and had managed to cover 98% of the households, prompting to now launch a "challenge" to find out if any family remained without access to basic banking facility.

In recent weeks, there has also been a significant increase in the funds deposited in the Jan Dhan accounts with the corpus in the 10.36 crore accounts going past Rs 8,000 crore, according to data available with the finance ministry. But 7.6 crore account holders, which is around 73% of all Jan Dhan accounts, had zero balance on December 30.

"We had done surveys and it shows that across several states we have achieved 100% household coverage. There are some households that are not allowing us access so we will launch a challenge to help find out if there are households that still do not have coverage," financial services secretary Hasmukh Adhia said on the sidelines of the Banker's Retreat here.
 


He clarified that of the 25 crore households in the census, around 22 crore households had participated in the survey conducted by banks and the percentage of households was based on these. He said that the three-odd crore households lived in gated communities and affluent areas and didn't need help in opening accounts.  

In August, the Narendra Modi government launched an ambitious plan to provide all households with a bank account and had hoped to open 7.5 crore accounts by January. But the target was achieved much earlier and the government realized that all households were still not covered, prompting it to scale the target, which has now been achieved. 

The household coverage report available with the government showed that there are few states such as Manipur (78%), Nagaland (76%), Meghalaya (83%), Arunachal Pradesh (84%), Odisha (86%), Sikkim (89%) and Jammu & Kashmir (89%) which still have a large number of households without access to a bank account. But several of the traditional laggards such as Bihar, West Bengal and Uttar Pradesh have near universal coverage.

In some of the districts such as Meghalaya's East Jaintia Hills and South West Khasi Hills, there is zero coverage. Adhia told TOI that special attempts will be made to reach to this population so that no one is left behind. In addition, he said that banks are being asked to sensitize account holders about using the RuPay debit card within the first 45 days so that they are entitled to the insurance facility.  

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

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.

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.

Sunday, November 16, 2014

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.