Jan Dhan scheme not to add to bad loans: banks | business | Hindustan Times
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Jan Dhan scheme not to add to bad loans: banks

business Updated: Aug 30, 2014 00:24 IST
Mahua Venkatesh

The opening of at least 150 million accounts with an overdraft facility of Rs 5,000 for each of them under the Pradhan Mantri Jan Dhan Yojana (PMJDY) is unlikely to add to banks’ bad loan portfolio.

The scheme was launched by Prime Minister Narendra Modi on Thursday and by Friday, over 1.84 crore accounts have already been opened.

The credit facility will be available in a phased manner and only after six months of opening the account to avoid any major default or pressure on banks non-performing asset — loans that do not yield returns — level, sources said.

Moreover, the facility would be extended to account holders for productive sectors and not for consumption purposes, according to the Indian Banks Association.

PMJDY is likely to cost banks an estimated Rs 70,000 crore.

“This will not create any burden on banks instead they will be able to garner huge CASA deposits, which are extremely low-cost. Besides it is up to lenders’ discretion to provide the credit facility after monitoring the account for six months,” said RK Dubey, chairman and MD, Canara Bank.

Launching the scheme, Modi said that 99% of the time loans given to the common and poor customers are repaid on time.

“Banks would do their own assessment of the account holder and study their repayment track record, so there is no cause for concern and we are confident that there will be no addition to NPAs due to PMJDY,” financial services secretary GS Sandhu told HT.

“There could be cases when banks refuse the credit facility to customers if they find that their repayment track was poor,” a senior SBI executive said.

Banks would enhance the credit limit from Rs 5,000 to Rs 15,000 in case the account holder repays on time.