Showing posts with label modi. Show all posts
Showing posts with label modi. Show all posts

Tuesday, December 16, 2014

Life insurance cover under Jan Dhan comes with riders

Bus

Keen to push through its financial inclusion plan, the government has finalised the life insurance cover to be provided under the Pradhan Mantri Jan Dhan Yojana. But unlike expectations, the cover has several riders, meaning that not all those who have opened an account under the scheme would be eligible for life insurance.

For starters, the Rs 30,000 life insurance cover would be limited to just one account holder per family. “The person should normally be the head of the family or an earning member of the family and should be in the age group of 18 to 59,” the guidelines state.

While the beneficiary will have to mandatorily exit the life insurance scheme at the age of 60 years, the cover is at present available only for a period of five years till 2019-20, after which it will be reviewed.

In addition, the eligibility criteria state that life insurance would be available only to those people opening a bank account for the first time between August 15, 2014 and January 26, 2015.

Further, the person must have a valid RuPay Card and biometric Card linked to the bank account or in the process of being linked to the bank account.

The Centre has also excluded various categories of people from the scheme, including Central and state government employees, people whose income is taxable under the Income Tax Act, 1961 or TDS is being deducted from the income, and their families.

“Persons who are included in the Aam Aadmi Bima Yojana covering 48 occupations defined under the Scheme, and their families” have also been excluded. Further, other eligible account holders who have life cover on account of any other scheme of the Bank against the account will have to choose between the two life covers.

Prime Minister Narendra Modi had launched the scheme on August 28, this year with the intent of financially empowering the people by opening bank accounts for two persons in every household.
Additionally, they are to be given a RuPay debit card, accidental insurance cover of Rs 1 lakh and an overdraft facility.

The government has targeted 7.5 crore households under the scheme. At present, 9.04 crore accounts have been opened with total deposits of Rs 7,006 crore. However, 6.68 crore accounts continue to be dormant.  Life Insurance Corporation of India is responsible for the life insurance cover through a special fund for the purpose which has an initial corpus of Rs 100 crore from the Social Security Fund.

Eligibility criteria
* Insurance would be available only to those people opening a bank account for the first time between August 15, 2014 and January 26, 2015.

* While the beneficiary will have to mandatorily exit the scheme at the age of 60 years, the cover is at present available only for five years till 2019-20 after which it will be reviewed.

Monday, September 22, 2014

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

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

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

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

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

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

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

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/

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.

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.

Wednesday, July 23, 2014

PM Modi set to revamp financial inclusion; new scheme to be unveiled on August 15

PM Modi set to revamp financial inclusion; new scheme to be unveiled on August 15




Prime Minister Narendra Modi is set to give a big boost to the ongoing financial inclusion drive by unveiling a comprehensive programme at the Red Fort in his address to the nation on the Independence Day.

The proposed comprehensive financial inclusion programme envisaging insurance and pension cover, apart from a default cover for lenders, is likely to envisage opening 15 crore more bank accounts, 12 crore of which will be in rural areas over next four years, according to a note sent to the Indian Banks Association (IBA) by Financial Services Secretary G S Sandhu.

According to the note, Mr Modi’s new comprehensive financial inclusion programme has three major shifts from the one pursued by the previous government.

First, the earlier efforts at financial inclusion had villages as the unit for coverage while the current plan focuses on coverage of households.

Secondly, only rural areas have been the focus so far while both rural and urban areas have been included now, says the ministry note.

Thirdly, the current plan is proposed to be implemented as a ‘mission mode’ project. It envisages a comprehensive coverage of all excluded households by a six-pillar approach in two phases, according to the note.

The first phase of the programme, which begins from August 15 this year and ends on August 14, 2015, will provide basic banking accounts with overdraft facility of Rs. 5,000 and RuPay debit card with inbuilt accident insurance cover of Rs. 1 lakh and creation of credit guarantee fund for coverage of defaults in overdraft accounts, according to the ministry.

The second phase, which will begin on August 13, 2015 and conclude by August 14, 2018, will cover micro-insurance and unorganised sector pension schemes like Swavlamban.

When contacted, IBA said already state-owned banks, insurers and regulators are working overtime to ensure a smooth kick-start.

“We are currently busy chalking out the modalities of implementation of the project, which will be implemented in the entire country after it is declared by the Prime Minister on August 15,” IBA chairman K R Kamath, who is also the chairman of Punjab National Bank, told PTI.

It is a good scheme as it envisages going beyond the geographical boundaries and promises of connecting each and every household, he said, adding that more than being commercially viable, it is important to link every household with the banking system.

“Through this programme, we are looking at providing two savings bank account facility-one each for the husband and the wife-to all those households which not served by the banking system so far,” MR Kamath said.

“Of course, these basic banking accounts will come with some in-built overdraft facility and RuPay debit cards with an inbuilt accident cover of Rs. 1 lakh. We are awaiting the final announcement of the scheme by the Prime Minister.”

Inclusive pension is also one of the pillars of the proposed comprehensive financial inclusion programme.

“Pension under ‘the mission mode’ will lay emphasis on this facility for the lower income segment and the unorganized workers,” said R V Verma, acting chairman of the Pension Fund Regulatory and Development Authority (PFRDA).

“We will seek to achieve and expand the scope of the National Pension Scheme (NPS) to serve the disadvantaged sections of the population through active involvement and participation of all categories of intermediary institutions like banks, NBFCs, MFIs, NGOs, corporates and annuity service providers,” Mr Verma added.

Though micro-insurance will come in the second phase of the programme, insurers have already started working on it.

“While the already existing 4,000 micro offices of the four PSU general insurers would be strengthened, over 2 lakh existing business correspondents will be asked to sell micro insurance products to ensure the last mile connectivity,” New India Assurance chairman and managing director G Srinivasan said.

“Though micro-insurance will come in the second phase only, we have already started working on it,” he added.

The premium for the low-cost insurance products, which is to be paid by the beneficiaries or from subsidy under the Rashtriya Swasthya Bima Yojana scheme, will range between Rs. 100 and Rs. 300 per annum, New India Assurance general manager K Sanath Kumar said.

Nabard will provide the initial Rs. 1,000 crore to create a credit guarantee fund to cover possible defaults on overdraft accounts under the scheme, a Nabard official said.

Several rounds of meetings have already been held by the Department of Financial Services with all the stakeholders of the programme, including state-owned banks, insurance companies and pension regulator PFRDA.

The banking sector would be expanding itself to hire an additional 50,000 business correspondents (BCs), launch over 7,000 branches and more than 20,000 new ATMs in the first phase, Sandhu told the IBA, adding that around 50,000 BCs are likely to be appointed in rural areas for the programme alone.