Public sector banks, which have witnessed a surge in the level of bad assets, will provide the Rs. 5,000 credit facility promised under the ‘Pradhanmantri Jan Dhan Yojana’, in a phased manner to avoid major defaults. In case of timely repayment, however, the credit limit could be enhanced to as much as Rs. 15,000.
Prime Minister Narendra Modi had in his Independence Day speech announced the scheme to bring people who do not have bank accounts, into the banking system as part of the financial inclusion revamp. The move would keep private money lenders out of the system by making cheap credit available to the poor.
After six months of an account opening, the account-holder may be given overdrafts to the tune of Rs. 5,000. The programme could cost the government Rs. 70,000 crore and sources said this would be structured in phases so as not put pressure on the exchequer.
“There is no cause for worry as it works like an overdraft, so we will first pay a certain amount, when the repayment is done, the account holder can go in for more credit,” TM Bhasin, chairman and managing director, Indian Bank told HT.
Besides, the new accounts would be linked to the Aadhaar number to avoid duplication.
Sources also said account holders may be asked to show evidence to the lender that the money borrowed was spent for productive purposes and not for pure consumption.
Under the revamped financial inclusion scheme, 150 million new bank accounts would be opened for 75 million identified households by August 2018.
The Union Cabinet has already given its nod to the programme that would include both urban and rural poor.
The mission would be in two phases. The first phase is expected to be completed by August 14, 2015 and the second by August 14, 2018. Bank accounts will be opened in
the first phase while insurance and pension facilities would be covered in the second.