Prime Minister Narendra Modi on Friday kicked off a revamped financial inclusion programme — Pradhan Mantri Jan Dhan Yojana — to bring 75 million poor households into the banking system.
The plan envisages opening two bank accounts for every family. Each account will come with an overdraft facility of Rs. 5,000, a Ru-Pay debit card and an accident insurance cover of Rs. 1 lakh.
Once the bank accounts are opened, the government will be in a position to transfer cash benefits, which it may announce in future, directly to the intended beneficiaries.
“We want to integrate the poorest of the poor with bank accounts under the Pradhan Mantri Jan Dhan Yojana,” Modi said in his maiden Independence Day address to the nation from Red Fort.
“Today, there are crores of families with mobile phones but no bank accounts. We have to change this. Our economic development must benefit the poor and it should start from here,” the PM added.
A back-of-the-envelope calculation shows that giving an overdraft of Rs. 5,000 each to 150 million bank accounts will require Rs. 75,000 crore, or more than twice the 2014-15 budgetary outlay of Rs. 34,000 crore for the Mahatma Gandhi Rural Employment Guarantee Act (MNREG).
It wasn’t immediately clear where the money will come from. A senior official in the finance ministry declined to comment on the matter.
The new mission will be completed in two phases. The first phase is expected to be completed by August 14 next year, while the second phase will be completed by August 14, 2018.
Bank accounts will be opened in the first phase and insurance and pensions will be covered in the second.
“This will bring in more people into the formal banking channel,” said Chandrajit Banerjee, director general, Confederation of Indian Industry.
“Only 58.7% of households in the country have access to banking services. So, the launch of the Jan-Dhan scheme is a welcome step,” said Arundhati Bhattacharya, State Bank of India (SBI) chairperson.
On July 10, finance minister Arun Jaitley had said in his budget speech that the financial inclusion scheme will deter people from investing money in fraudulent schemes.