The Pradhan Mantri Jan Dhan Yojana is the NDA government’s flagship financial inclusion scheme launched by Prime Minister Narendra Modi on August 28, 2014. The scheme promises to provide bank accounts to the 42 percent Indian population that currently lacks access to the nation’s banking system and basic financial facilities such as insurance and debit cards. Customers opening bank accounts opened under the scheme shall not be required to fulfil the KYC norms for about a year. Account holders shall be provided a zero balance account with any nationalized bank and also be provided a RuPay debit card and accident insurance. Accounts opened before Republic Day 2015 also receive a life insurance cover as incentive.
Over 1.5 crore bank accounts were opened up under the scheme on the day of its launch. By September 8, 2014, it was estimated that 3.02 crore accounts have been opened under the scheme. Of these about 1.89 crore have been opened in rural areas and about 1.13 crore in urban areas. Indian banks are estimated to have collected about INR 1,496.51 crore from the scheme by the first week of September.
Who foots the insurance premium?
Ever since the launch of this scheme which enables all the people of India to avail of financial benefits such as life insurance and debit cards, the Finance Ministry has been holding discussions with the Life Insurance Corporation (LIC) to conclude on the premium that will be required for the promised life cover. It has been finalized that INR 50 crore will be set aside from the Social Security Fund towards the premium. The Social Security Fund was initially set up in 1988-89 to provide the poorer sections of the country the benefits of a group insurance facility. It is currently worth INR 1800 crore and is managed by LIC, a State-owned insurance and investment company. The fund that shall provide the premium amount to LIC – the life insurance provider for the Jan Dhan Yojna – shall be a revolving fund and monitored by the Finance Ministry while administered by the LIC. The life insurance cover of INR 30,000 will be available only to those who open a bank account under the scheme before January 26, 2015.
The premiums for the other insurance cover – an accident insurance of INR 1 lakh for Jan Dhan Yojna customers will be footed by the National Payments Corporation of India (NPCI) – a corporation promoted by the Indian public sector banks. The NPCI Managing Director, A P Hota remarked that “The premium on INR 1 lakh cover is less than INR 1 per person. This is probably a world record that such a massive package of bank accounts and insurance cover is being offered to record number of people”.
Concerns crop up
The Indian Central bank, the Reserve Bank of India (RBI) warned all the banks that come under its umbrella to exercise extreme caution while opening bank accounts under the Pradhan Mantri Jan Dhan Yojna. The RBI believes that people could open these zero balance accounts in a number of banks. The newly launched scheme does not require any identification documents as stipulated by regular KYC norms – it requires the account holders to deposit only their photograph and signature. The worry is that these accounts come with an INR 1 lakh insurance cover. The insurance cover offer could be misused by opening multiple accounts under the scheme.
To avoid duplication of claim settlement, the banks may need the customers to carry their Aadhaar card and comply with biometric requirements. This could, however, foil the idea of the scheme which promises bank accounts without any identification documents at all. In addition, the LIC is likely to provide life insurance cover to only those people between the ages of 18 and 59, causing further confusion in the implementation of the scheme.
A number of details regarding the insurance packages, however, still need to be finalized. The issue of dormant accounts – a major concern in the low value banking network – needs to be sorted out . Will insurance cover be withdrawn if the accounts remain dormant? Will insurance cover be withdrawn if the Jan Dhan Yojna accounts are converted into regular accounts after a year? What is the incentive to comply with KYC and convert into regular savings accounts then? These are a number of questions that the Finance Ministry will still need to sort out.
Bill and Melinda Gates Foundation’s offer
Last week the founder of Microsoft, Bill Gates met Prime Minister Narendra Modi and Finance Minister Arun Jaitley. The Bill and Melinda Gates Foundation (BMGF) has offered assistance in monitoring the progress of the scheme. Gates said that the foundation could help in plotting and mapping the performance of the scheme in different parts of the country and flag up any part which is likely to have reached its saturation level. The BMGF proposal shall be duly considered and accepted if feasible, said Prime Minister Modi.
Aadhaar Unique Identification Initiative
Aadhaar was an initiative of the Planning Commission to provide the people of India a unique identification number-based identity card. Despite lacking any legal force, about INR 3,500 crore have been spent on the issuance of Aadhaar cards across the country. The execution of this project has thrown up a number of major concerns. Also the issuance has neither been complete nor uniform across the country. It remains to be seen if the NDA government accords it the same importance that was envisioned initially.
A number of inconsistencies have started to crop up in the issuance of the Aadhaar cards across the country. News reports from Rajasthan revealed that the Hindu God Hanuman was issued an Aadhaar card complete with his father’s name as “Pawan-ji” and with an illustration for an image. It later came to light that the project of issuance of Aadhaar has been outsourced in the State to agencies that have failed to conduct any verification or background checks. Lakhs of fake cards were reported to be generated.
In Andhra Pradesh, a 11-year old boy with three conjoined fingers was denied an Aadhaar card and he ultimately killed himself over the disappointment. In Bengal’s Hoogly district, hundreds of Aadhaar cards have been issued with expletives and abuses suffixed to the holders’ surnames. A number of holders have been mentioned as transgender. The shocked residents plan to file for harassment and defamation.
Aadhaar registrations step up
Reports from early September 2014 suggest that over 10 lakh people from Manipur have registered for the biometric Aadhaar cards. Provisional cards have been issued to all those registered and original cards will be issued once the corrections in these provisional cards will be compiled. In Pune, authorities have launched a fresh drive and are now setting out to issue Aadhaar cards to prison inmates as well. In Delhi, the 12 digit Unique Identification Number of the Aadhaar card has helped eliminate bogus ration cards meant to provide subsidized food items to poor people.