The Jan Dhan Scheme, launched by Prime Minister Narendra Modi on Thursday, will use nearly 900 million cellphone connections in India to spread banking services across the country, especially in rural areas.
India represents a third of all mobile phone connections in the Asia Pacific, with the figure expected to rise to 1.16 billion by 2017.
According to the 2011 census, 41.3% of India’s population — or 513 million people – live in households without access to formal financial services.
What’s more, a report by Global System for Mobile Communications (GSMA), an association that promotes GSM technology, states that 80% of Indian villages do not have a bank within 2 kilometres but the vast majority of the people living in those villages have a cellphone.
This therefore provides a perfect platform for the government to use mobile phones to push the financial inclusion scheme, which in turn is likely to boost economic growth.
Concerns, however, have been raised over national security and the absence of an efficient regulatory model.
At present, cellphone users can deposit up to `5,000 with telcos that can be used for merchant transactions.
However, no physical transfer of funds is allowed outside of the banking system.
“Mobile-based financial services with robust public sector banking system — this would certainly help increase access to financial services for vast majority of the Indian population,” said NK Goyal, president, Communications, Multimedia and Infrastructure (CMAI), an apex telecom industry body.
Mobile micro-savings accounts create a vital and convenient buffer for the poor against the shocks of severe and unexpected costs such as job loss, the death of a spouse or a family illness, according to the GSMA report.