Tuesday, September 02, 2014

Pradhan Mantri Jan Dhan Yojana

The government's financial inclusion has the mighty backing of the PM. The early success in getting  in 1.5 crore accounts on the first day is no small measure to the PM writing directly to bank heads and (I believe) to lakhs of bank officers.

It is also better thought through than some of the earlier schemes. It's not just about creating deposit accounts- that doesn't attract people or make money for the bank. There is a loan product (overdraft of Rs 5000), an accident insurance policy for Rs 1 lakh and a life insurance policy of Rs 30,000, all of which are revenue generating. The public sector system is also better geared up today thanks to the experience it has had with banking correspondents and mobile technology.

There are problems on the ground. An important problem is multiple accounts being created with different banks. This has to be sorted out. Then, there are problems of communication. Many poor have queued up because they have been told that they stand to be paid Rs 1.05 lakh!

My analysis of the potential benefits of the scheme in an article in the Hindu, A big bang reform that may be spot on.

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