Showing posts with label financial inclusion. Show all posts
Showing posts with label financial inclusion. Show all posts

Tuesday, February 9, 2016

NPCI aims at financial inclusion: Rupay Card News



Aiming at financial inclusion for all with India's domestic card service RuPay, the National Payments Corporation of India (NPCI) said that as many as 170 million of its 230 million customer base were first-time card users.



"We already have as many as 596 members who are in the RuPay network, including national, international and state cooperative banks. We are now trying to get the district central cooperative banks (DCCB) also in the fold," says A P Hota, managing director and CEO of NPCI.



RuPay also helps curb forex loss. For every transaction involving foreign card providers like Visa, MasterCard, American Express, there is the transaction fee on it going out of the country - an estimated 400 crore annually. "With a domestic card service system, there is a tremendous amount of money that India can retain," says M Balachandran, chairman, NPCI.



Another advantage with using RuPay over international card providers for a consumer is when it comes to the merchant discount rate (MDR) - the rate charged by banks providing debit and credit card services to merchants. So normally a food bill of Rs 2,000 or a saree purchase of Rs 4,000 will result in a Rs 20-Rs 40 deducted as MDR.



"With RuPay, the advantage is that we charge a fixed rate. We charge 60 paise on the acquirer bank and 30 paise on the issuer bank - amounting to 90 paise per transaction. Normally debit card interchange is anywhere between 0.65 to 1%. Credit card interchanges could be 1%-2%. So with RuPay, there is lower costs to merchants, which is passed onto the card holder," says NPCI's Hota.



RuPay also has RuPay Platinum and RuPay international, in partnership with Diners' Club and Discover Financial Services, that aims at catering to a wider audience. NPCI plans to launch RuPay credit cards by June.

Monday, November 9, 2015

PM Modi emphasizes on Financial inclusion

PM Modi emphasizes on Financial inclusion

Prime minister Narendra Modi has said real development in the country means bringing positive change into the lives of the common man and eradication of poverty. 

While addressing the Delhi Economics Conclave in New Delhi on the economic and institutional reforms introduced by government, Prime Minister asked economists to deliberate and find 'out-of-the-box' sustainable solutions. 

'Reform to transform' that was the mantra Prime minister Narendra Modi shared at the Delhi economics enclave. 

He stressed on the fact that while talking of reform, it is important ask two critical questions: 

REFORM FOR WHAT? and REFORM FOR WHOM? In answer to the the second question Narendra Modi reiterated his government's motto of Sabka Sath Sabka Vikas. 

The theme of the Conclave this year is 'Realising India's JAM -Jan-Dhan Aadhar Mobile. It seeks to explore ways to improve the subsidy procedures. The PM has given an all-new meaning to JAM saying it stands for JUST ACHIEVE MAXIMUM. 

While speaking on the reforms, PM said that 19 crore people have been connected with the banking system under the Jan Dhan Yojana in just a few months. 

26000 crore rupees has been deposited in these accounts and the Rupay Card facility is now being used by 36 percent of the population. 

Under Pradhan Mantri Mudra Yojna, 60 lakh people have been issued loans worth Rs 38000 crores. 

1.25 lakh bank branches have also been given the target of issuing loans to at least have one dalit and one woman to achieve true financial inclusion. Around 12 crore people are benefiting from these programs. 

The PM said that the economy of the country is strong and taking it to greater heights is not a short-term task but a long term objective. 

Highlighting the achievements of his Government, he said-Soil health card is slowly transforming the destiny of farmers, transparent auction processes is helping in curbing corruption. 

In a push to infrastructure development, 26 KM roads are being constructed per day now as compared to 5 KM per day earlier. 

Referring to cooperative federalism in action, the Prime Minister said economic and even foreign policies are now developed in consultation with Chief Ministers. 

He also referred to the Swachta Abhiyaan which the country has adopted, leading to both economic reforms and improving the country's image in the world. 

Tuesday, December 16, 2014

Moving towards full financial inclusion

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

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

The campaign included:-

A financial literacy programme.

Enrolling all residents in UIDAIs Aadhar scheme.

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

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

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

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

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

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

Monday, September 22, 2014

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.

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/

Wednesday, September 10, 2014

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.

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.

Thursday, August 28, 2014

PM launches Jan Dhan Yojna, 1.5 crore bank accounts opened on Day 1




Prime Minister Narendra Modi on Thursday launched his government's mega scheme 'Jan Dhan Yojana', declaring that it was aimed at eradicating financial untouchability by providing bank accounts to the poor.

On the inaugural day, a record 1.5 crore bank accounts were opened across the country, the largest such exercise on a single day possibly anywhere in the world.

Unveiling the scheme within 100 days of forming the new government, Modi said, it will cover 7.5 crore people by January 26, 2015, who will be provided zero-balance bank account with RuPay debit card, life insurance cover of Rs 30,000 in addition to accidental insurance cover of Rs 1 lakh.

Later the account holders will be provided an overdraft facility of up to Rs 5,000.

"If Mahatma Gandhi worked to remove social untouchability, if we want to get rid of poverty, then we have to first get rid of financial untouchability. We have to connect every person with the financial system. And for that this programme has been given impetus," he said, adding, "when a bank account is opened, it's a step towards joining economic mainstream."

Prime Minister Narendra Modi felicitating a beneficiary couple at the launch of the Pradhan Mantri Jan Dhan Yojana in New Delhi on Thursday. (PTI photo)
Modi recalled the bank nationalization of 1969 with the avowed objective of spreading the reach of financial system to the doorsteps of poor. "But I regret to say that after 68 years of independence, not even 68 per cent of population is covered by the banking system," he said.

The scheme was simultaneously launched at multiple places by 20 chief ministers, several Union ministers, including information minister Prakash Javadekar at Pune, law minister Ravi Shankar Prasad at Chennai, external affairs minister Sushma Swaraj at Bhopal, home minister Rajnath Singh at Lucknow and HRD minister Smriti Irani at Surat.

There were in all 600 programmes and 77,852 camps on the opening day to open bank accounts.
Modi said history has been created in the banking system with opening of over 1.5 crore account in a day. Besides, a record has been created by providing 1.5 crore accidental insurance covers of Rs 1 lakh.

The Prime Minister described the occasion as a festival to celebrate the liberation of the poor from a poisonous cycle ("Vish-chakra se gareebon ki aazaadi ka parv").

"Banks have assured me they will do this work before January 26. Those who open accounts by January 26, 2015 over and above the the Rs 1 lakh accident, they will be given life insurance cover of Rs 30,000. This will help the poor family," he said.

In the third phase, he said, these account holders would also be provided micro-pension facility.

"I believe when a person opens a bank account then he or she takes the first step to get connected with the economic system. Today the 1.5 crore family who got connected with the economic system this will give a boost to the economy," he said.

Going forward, he can avail Rs 5,000 loan from the bank, the Prime Minister said, adding, this facility would be available after six months of opening of the bank account.

Expressing satisfaction at a number of records being broken today, the Prime Minister said the nationwide success of the enrollment drive today would give confidence not just to the officials of the department of financial services and banking sectors, but also to officers across the Union government, that they can successfully achieve the goals that they set for themselves.

"Never before would insurance companies have issued 1.5 lakh accident insurance policies in a single day. Never before in economic history would 1.5 lakh bank accounts have been opened in a single day.

"Never before has the government of India organized a programme of such scale — over 77,000 locations — with the participation of so many chief ministers, Union ministers, government and bank officials," the Prime Minister said.

Wednesday, August 27, 2014

HDFC Ergo to offer insurance cover to RuPay cardholders for 3 years

 According to the terms, HDFC Ergo would provide an insurance cover of Rs 1 lakh to all RuPay cardholders which can be claimed in case of death or permanent disability.

General insurance company HDFC Ergo has won the mandate to provide insurance cover to all RuPay cardholders, a move which will benefit the insurance company with the government ready to implement the financial inclusion agenda. The Reserve Bank of India-promoted National Payments Corporation of India (NPCI), a company which provides the technology backbone for most payments in India as well as offers the RuPay card, has given the contract to HDFC Ergo for a period of three years.

According to the terms, HDFC Ergo would provide an insurance cover of Rs 1 lakh to all RuPay cardholders which can be claimed in case of death or permanent disability.

AP Hota, CEO and MD of NPCI, confirmed that the company has tied up with HDFC Ergo for the Rs 1 lakh insurance cover. However, in an email response to ET, a spokesperson for HDFC Ergo, said, "We won't be participating for this story."

The company has issued 2.3 crore cards, and it is estimated that 15 crore new bank accounts would be opened and as many new cards would be issued in the unbanked areas by March 2016, and the premium will be paid by NPCI, and not the cardholder. Bank officials, who did not wish to be identified, said that NPCI would be paying a premium of Rs 1 per card. "We are in the process of simplifying the claims procedure and also making customers more aware of their procedure to make claims," said Hota.

However, the insurance company will consider the claim only if the card is active. A card would be considered active if the cardholder has swiped it within 45 days of making a claim. NPCI is in talks with HDFC Ergo to improvise a scheme wherein the claim could be made if it had been swiped 90 days before.

The Narendra Modi-led government had announced on August 15 a massive financial inclusion plan of opening bank accounts and providing insurance cover. On Thursday, the financial inclusion  plan of opening bank accounts and providing insurance cover. On Thursday, the financial inclusion programme called Jan Dhan Yojana will be launched in 75 centres, covering 600 districts and 60,000 villages.

It is estimated that 60% of country's population does not have access to formal banking services.

The Jan Dhan Yojana aims to provide one bank account for every household in a year. Since each new account-holder will also be given the RuPay card, this will increase the customer base of HDFC Ergo.

Friday, August 8, 2014

Will PM Narendra Modi's financial inclusion plan use Aadhaar for authentication?

In less than two weeks, PM Narendra Modi is expected to announce a new Financial Inclusion drive.
However, even as the anointed day - the 15th of August - draws near, key aspects of this drive are still unclear.

 

The programme, called Sampoorn Vittiyea Samaveshan (SVS), seeks to add 20 crore new bank accounts. These will be linked to Aadhaar. They will probably provide an overdraft facility. And they will be used for cash transfers.

Go deeper into the details, however, and you encounter a set of unresolved questions. Prime among them, the role of Aadhaar.

While researching this story, ET reviewed two drafts produced by the Department of Financial Services - one in June, and the second in July. The draft dated 8 July, 2014, says: "This account would be linked with the Aadhaar number of the account holder and would become the single point for receipt of Direct Benefit Transfers (DBT) from Government/Local Bodies."

According to a source close to the UIDAI, who spoke to ET on the condition of anonymity, this phrasing suggests that while Aadhaar numbers might be seeded into bank accounts, it might not be used for authentication.

In other words, once the cash flows into the Aadhaar-linked bank account, last-mile authentication when the money is being withdrawn will be done using the authentication systems of either the relevant bank or the last-mile service provider - like a Banking Correspondent (BC) company.
Not using Aadhaar for last mile authentication has significant fallouts for the UIDAI. Which, among other things, has the Aadhaar-enabled Payment System as one of its key components, and sees authentication services as one of its principal functions and revenue streams.

Till now, the UIDAI has argued that Aadhaar-based authentication is needed to show that the DBT (Direct Benefit Transfer) has indeed reached the targeted beneficiary.

However, from the field, this claim has been marred by persistent reports that online biometric authentication is not working for manual labourers and the old. Agrees Sanjay Kuberkar, The founder of Adrenaline Financial Inclusion Advisors, "The biometrics do not always work."

Another reason the UIDAI wants Aadhaar-enabled authentication is because that will further inter-operatability. A person can use her biometrics to access her account through any BC, any bank.
Says the source close to the UIDAI, "If banks or last-mile providers use their own proprietary (biometric) authentication technologies, then there will be no inter-operatability." In other words, a person with an account in United Bank may not be able to use a BC working with State Bank of India to access his account.

This is where the debate gets complex. Aadhaar has defined standards for Micro ATMs and Biometric Capture. Banks and BCs adhering to those standards, with BCs who have plugged into the bank's core banking servers, can send authentication queries all the way to the UIDAI's central ID repository. In this design, a beneficiary can access her account through any service provider if they are Aadhaar-compliant.

But, banks too have been creating their own biometric databases. And the question is whether authentication requests where one bank sends one biometric authentication query to another bank can be as interoperable as the Aadhaar ones.

Under former DFS Secretary DK Mittal, the department ran such pilots in Haryana. These too were online biometric authentications but the biometrics were stored with the banks. But those, says the UIDAI source, failed.

However, another way to ensure interoperatability is to use PIN numbers instead of biometrics. It is here that a proposal in the SVS documents is interesting. It proposes that all account holders be provided with a RuPay card. Says Kuberkar, "The card works at any ATM, and does not require biometric authentication."

Counters the UIDAI source, "Biometrics are safer than PIN numbers.

In contrast, PIN numbers can be used also by those who have trouble with biometrics.
There is another reason why some banks want to retain authentication with them. Aadhaar was planning to start charging for authentication. A decision which has now been deferred to December.
Says Kuberkar: "Cost of Aadhaar authentication is an issue, even if the cost is kept at just 25 paise per authentication. There is at least one client bank of mine who is considering to use their own biometric authentication method instead of Aadhaar because of the cost implications."

What does this seeding/authentication debate mean for reducing leakages? According to MS Sriram, visiting faculty at IIM Bangalore's Centre for Public Policy, it is a good idea to use the Aadhaar number only for seeding. "Linking bank accounts with the Aadhaar number will help the government eliminate ghosts and duplicates from beneficiary lists."

Such a move, he says, also addresses the concerns around biometrics not working and privacy. "Using Aadhaar only for seeding also takes care of some privacy-related questions. A trail of a person's movements will not be available any longer at the central server."

About ten days ago, the Department of Financial Services (DFS) was expected to present an updated iteration of SVS to the Prime Minister. This was shortly after he reposed his faith in the UIDAI project. It is yet unclear what transpired in that meeting. The documents in the public domain pre-date that meeting. Emails to DFS officials seeking an appointment went unanswered.

However, based on conversations with UIDAI officials and Banking Correspondent (BC) companies, it seems there is little clarity on this question on how Aadhaar will be used.

MP govt to launch financial inclusion drive across state

This will ensure timely payment of wages and other compensation against various government-sponsored welfare schemes



To meet the total financial inclusion programme to be launched by Union government on August 15 this year Madhya Pradesh has geared up to launch its total financial inclusion drive in its all 51 districts. This will ensure timely payment of wages and other compensation against various government-sponsored welfare schemes. 

"The banking service area mapping has been completed in all 51 districts in Madhya Pradesh. The area of operation has been allotted for implementation of total financial inclusion (Sampoorna Vittiya Samavesh) to all banks in all districts has also been completed. Opening of accounts of Head of every household will commence from August 15 in camp mode," a senior government official said.

Every bank will prepare a monthly and quarterly calendar for holding camps in allotted areas and connectivity issue is to be informed to state level bankers committee. "The bank will have rights to shift the business correspondent, who will operate accounts, locations to the village within 5 km radius, where connectivity is available. If there is no connectivity in any of the villages, banks will have to explore to provide satellite connectivity through VSATs for those locations," the official said, adding, Ministry of Finance may be requested to reimburse the cost of the same to banks through the financial inclusion fund.

At least one account for every household in the country is mandatory, for the head of the household. Every household will have access to banking services within 5 km by September 2015 except hilly, tribal, forest and desert areas.

"The idea was floated by state government to provide banking services by bank branches within periphery of five kilometers," the official said. Under the plan Issuance of Rupay Card in accounts is to be encouraged. But the bankers will have to ensure that the card and accounts should not become dormant through motivating account holder to make card transactions.

"An overdraft limit of Rs 5,000 is to be allowed to the account after a reasonable period and after taking into consideration the saving or credit history of account holder," the official said.