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Dark side of the Pradhan Mantri Jan Dhan Yojna: Why 14 crore bank accounts are not the yardstick to measure the scheme’s success

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By Harshmeet Singh

‘Mera khaataa Bhagya Vidhata’, the motto of one of the most ambitious schemes of the central Government, the Pradhan Mantri Jan Dhan Yojna, depicts a picture which is far from the present reality. The Government has been patting its back highlighting that more than 14 crore bank accounts have been opened under the scheme till 31st March. But if just swelling up the number of accounts is the yardstick to measure the scheme’s success, UPA’s ‘Swabhimaan’ scheme, which saw more than 60 million accounts opening, should be called a similar success!

According to a recent World Bank report, the Jan Dhan Yojna, so far, has failed to address the biggest challenge – keeping the accounts active. Moreover, there is still no clarity over a number of ‘spectacular’ features that the government has been so vocal about! This gives rise to a crucial question – Is the Pradhan Mantri Jan Dhan Yojna just an empty vessel with too much noise and nothing inside? Let’s dissect the different aspects of the scheme individually (including the ones not covered in the advertisements!) before we arrive at any conclusion.

Insurance at no cost. Wait! Is it?

According to the features of the scheme, every account holder would be provided with an accidental insurance of Rs 1 Lakh and a life insurance cover of Rs 30,000. This clause comes with a ‘secret condition’ which hasn’t been mentioned in the advertisements promoting the scheme. The condition says that to be eligible for the accidental cover, you must use your RuPay debit card for a transaction at least once in every 45 days. Since the scheme majorly targets the rural population, it won’t be incorrect to assume that most of the customers would lose out on this insurance due to dormant debit cards.

This insurance is attached to the RuPay debit card which would be given to the account holder. The RuPay card is a product of RBI’s National Payments Corporation of India (NPCI). The insurance premium, in case of a mishap, would be payable by the NPCI. Since NPCI’s earnings would depend upon the usage of RuPay card by the customers, the only way for the NPCI to compensate for the insurance premiums is to ensure that the debit cards are used frequently.

The Life insurance cover, on the other hand, has its own hidden conditions. Only the account holders with the age of above 18 and below 59 would be eligible for this insurance cover. Moreover, insurance would only be provided to the account holders with valid Aadhaar card. A number of experts also say that since the account holders aren’t given any official paper guaranteeing their insurance cover, they would have a hard time in claiming the amount.

An overdraft facility of Rs 5,000! Awesome! But who pays?    

One of the most talked about features of the scheme remains the Rs 5,000 overdraft facility once the account is 6 months old. According to the Government, it would depend upon the discretion of the banks to provide this facility to the account holder. The vague directions from the Government say that ‘the transactions of the first six months must be satisfactory in view of the bank’

Although there were some speculations about NABARD acting as a guarantor for the funds released through the overdraft facility, there hasn’t been any official confirmation in this regard.

Spare a thought for the Public Sector Banks please!

This scheme presents a precarious situation for the Public Sector Banks. Their bosses (Government) come out with populist schemes without consulting them and then question them if they fail! Although the Government directed the banks to open accounts on a zero minimum balance basis, these accounts collectively had a balance of over Rs 15,000 crore till 31st March. While this seems a bright spot at the first look, it only comes down to an average account balance of little over Rs 1,000.

The Banks require certain minimum account balance in order to recover the operational cost of the accounts. This ‘minimum balance’ is much more than the figure of Rs. 1,000 (Rs 10,000 – Rs 15,000 for Banking Correspondent model). In short, these accounts would put a humungous operational cost upon the already stressed Public Sector Banks. With most of these accounts remaining dormant, the banks can’t be blamed for feeling hard done by the scheme.

Banking Correspondent model – Is it the right way ahead? 

The most critical aspect of financial inclusion remains the ‘last mile connectivity’. With less than 50,000 out of the total 6 lakh villages having a bank branch, the government has decided to go ahead with the Banking Correspondent Agent model to ensure financial inclusion.

A Banking Correspondent Agent usually earns 2% commission on every transaction, thus earning a monthly income of close to Rs. 2,000. With such low incomes and a tough job environment, these correspondents frequently give up their jobs. In fact, according to a recent survey by the RBI, almost 47% BCAs are missing from their jobs. There have also been instances where these BCAs have demanded illicit service charge from the rural customers. Such commissions are charged for a number of services including withdrawing money and loan processing. The current strength of BCAs, according to the RBI, is close to 3 lakh but their impact is still far from satisfactory. While the Government plans to increase the number of BCAs, it would also result in an increased operating cost for the Banks.

According to the 2011 census, only 59% households in India have a bank account. Considering the gloomy situation, the need for financial inclusion in the country is imperative. But launching schemes without a properly thought out framework would only give rise to disappointment on the part of the public and the Government itself.

  • The article has given eye-opening information on Jan Dhan Yojna. It is obvious a lot of propaganda has been done about it, but on the ground the success is far from satisfactory. I have yet to hear from government or any other quarter, how many so far have got the accidental insurance benefit under Jan Dhan Yojna, perhaps not even a couple of thousand. Some body should ask this question using RTI.

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  • The article has given eye-opening information on Jan Dhan Yojna. It is obvious a lot of propaganda has been done about it, but on the ground the success is far from satisfactory. I have yet to hear from government or any other quarter, how many so far have got the accidental insurance benefit under Jan Dhan Yojna, perhaps not even a couple of thousand. Some body should ask this question using RTI.

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Rs 4,000 Crore Plan for Herbal Cultivation Includes Ganga River Banks, Informs Finance Minister

NMPB will identify 800 hectare of land near the river for the same

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Finance Minister Nirmala Sitharaman on atomic energy research reactor
Finance Minister Nirmala Sitharaman said that the government will provide level playing field for private companies in satellite launches and space-based services. Wikimedia Commons

Finance Minister Nirmala Sitharaman on Friday informed that a corridor of medicinal plants would be created on the banks of the Ganga and for this National Medicinal Plants Board (NMPB) would identify 800 hectare of land near the river.

It forms an important part of a slew of initiatives announced by the minister towards development of agricultural infrastructure, capacity building, logistics and legislative reforms.

-River_Ganga Finance Minister
Finance Minister Nirmala Sitharaman’s decision to create a corridor of medicinal plants on the banks of the Ganga is part of the Rs 4,000 crore programme launched for the promotion of herbal cultivation. Wikimedia Commons

Read More: No Trace of Community Transmission in Karnataka: Medical Education Minister

The NMPB has supported 2.25 lakh hectare area under cultivation of medicinal plants. Now, 10,00,000 hectares will be covered under herbal cultivation in next two years with the outlay of Rs 4,000 crore.

The move is expected to lead to Rs 5,000 crore income generation for farmers. It will also develop a network of regional Mandis for medicinal plants. (IANS)

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Finance Minister’s Announcements Will Boost MSMEs: PM Modi

Modi praised the announcements made by the Finance Minister in a tweet

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Prime Minister
Prime Minister Narendra Modi took to Twitter to appreciate the announcements made by the Finance Minister. Wikimedia Commons

Prime Minister Narendra Modi on Wednesday hailed the announcements made by Finance Minister Nirmala Sitharaman to aid the Micro, Small and Medium Enterprises (MSMEs), which have taken a beating during the Covid-19 induced lockdown.

Modi tweeted, “Today’s announcements by FM @nsitharaman will go a long way in addressing issues faced by businesses, especially MSMEs. The steps announced will boost liquidity, empower the entrepreneurs and strengthen their competitive spirit.

He also used the hashtag ‘Atma-nirbhar Bharat Abhiyan’, which is a reference to self-reliant India, something which he vowed to turn the country into during his televised address to the nation on Tuesday night.

TV, LED panels, Finance Minister, India, import duty
Sitharaman announced to widen the definition of MSMEs and raise the investment limit on Wednesday. Wikimedia Commons

Speaking to the media here on Wednesday, Sitharaman announced to widen the definition of MSMEs and raise the investment limit. Another criteria, turnover of the company, has also been added to the required norms for classification of MSMEs.

Read More: Bars, Guest Houses Allowed to Open in Lockdown 4, Urges Goa Minister

Sitharaman also announced a collateral-free automatic loan for MSMEs of up to Rs 3 lakh crore, among other liquidity measures.

In a move to provide more scope for Indian companies, including MSMEs, the Centre has decided to disallow global firms from participating in government procurement tenders up to Rs 200 crore.

These were part of a multi-pronged approach of the government to rejuvenate the sector which has been badly hit by the suspension of economic activities in the country in the wake of the nationwide lockdown which is place to fight the Covid-19 pandemic. (IANS)

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Indian Prime Minister Narendra Modi Warns About Complacency in The Fight Against COVID-19

Modi Warns Indians Against Complacency in Fight Against Coronavirus

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Indian Prime Minister
The researchers did find that public health measures, including school closures, social distancing and restrictions of large gatherings, have been effective. VOA

By Anjana Pasricha

Indian Prime Minister Narendra Modi warned the country about complacency in the fight against the coronavirus pandemic in a Sunday radio address and appealed to people to strictly comply with a nationwide lockdown that has been in effect for over a month.

He stressed the need to sustain India’s “people-driven” war against the coronavirus.

The prime minister, a popular leader in country of 1.3 billion people, urged Indians to wear masks, follow social distancing norms and avoid spitting in public places calling these measures “the biggest medicine to fight this disease in the days to come.”

Indian Prime Minister
Indian Prime Minister Narendra Modi warned the country about complacency in the fight against the coronavirus pandemic. Flickr

The message comes as India takes tiny steps to restart the economy, raising worries that this may cause a spike in coronavirus cases. It is also seen as targeted at areas which remain unaffected by the virus — most of India’s infections are racing through densely packed cities while its vast countryside is largely unaffected.

Modi said people should “not be trapped into over-confidence and nurse the belief that in our city, in our village, in our streets, in our office, coronavirus has not reached and that is why it will not reach.”

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Indians have so far adhered zealously to the calls for a stringent lockdown as the dreaded infection spread a wave of fear. Several neighborhoods in cities have imposed their own strict guidelines while volunteer squads in many villages do not allow outsiders to come in.

Whether such strict compliance will continue remains to be seen as the country begins to unlock  on Saturday it allowed shops in rural areas and neighborhood stores in cities to open. Farm based businesses and some factories restarted earlier this week.

Indian Prime Minister
Indian people stand on the lines drawn to maintain safe distance as they wait to receive free food being distributed by Central Reserve Police Force (CRPF) during a 21-day nationwide lockdown to slow the spreading of coronavirus disease (COVID-19) in Chennai, India, April 1, 2020. VOA

However not everyone is rushing to open their shutters and some traders remain wary about doing business while the infection is still raging. “Many shop owners told me they may not open immediately because customers are unlikely to come, so why should we expose ourselves,” according to Praveen Khandelwal, the Secretary- General of the Confederation of All India Traders. “It will take time for them to pick up confidence.”

But as calls grow to open up more sectors of the economy, specially from big business, the government is expected to draw up a strategy on Monday about how it plans to exit the lockdown that is due to end on May 3.

Also Read- UNICEF Warns That COVID-19 Crisis Prevents Shipment of Vaccines for Children

India saw its biggest spike in cases of coronavirus infections on Saturday with nearly 2,000 new cases taking the nation’s total to about 26,500. 824 people have died.

Although those numbers are modest compared to many countries, many fear they may not reflect the accurate spread of the infection because testing has been limited so far and is only now being ramped up in areas that are “hotspots.”  (VOA)