This paper aims at understanding the steps that have been taken by India with respect to the financial sector in the last decade and especially after the BJP Government came to power in 2014 with the promise of changing the image of the country world-wide in terms of ease of doing business and an inclusive economic growth advertised under the banner – ‘sabka saath sabka vikas’, after the corruption scams and policy paralysis under the previous government had literally marred the reputation of the country.
The key initiates of the Modi Government are as under:
• Pradhan Mantri Jan-Dhan Yojana (PMJDY) which was launched in August 2014 provides for financial inclusion to ensure access to financial services, such as Banking/ Savings & Deposit Accounts, Remittance, Credit, Insurance, Pension in an affordable manner.
The key benefits under the scheme include, interest on deposit, accidental insurance cover of Rs. 1 lac, no minimum balance requirement. The scheme also provide life cover of Rs. 30,000/- payable on death of the beneficiary, subject to fulfilment of the eligibility condition, easy transfer of money across India. Furthermore, the beneficiaries of government schemes will get Direct Benefit Transfer in these accounts and after satisfactory operation of the account for 6 months, an overdraft facility will be permitted. It also provides for access to pension, insurance products and claims under Personal Accidental Insurance under PMJDY subject to certain conditions as well as overdraft facility upto Rs.5000/- for one account per household. Part from the above, it also provides for loan benefit against the scheme i.e. individuals whose Jan Dhan account completes 6 months are eligible to obtain loans of up to Rs.5000 and aims to make available certain basic financial transactions via mobile phones to ensure that even people from rural areas and the unorganized sector have access to quick and convenient banking options.
One of the major benefits of the PMJDY scheme would be the decreased dependency of the farmers on the local/small money lenders who are known to indulge in fraudulent activities to coerce the borrowers to pay higher interest rates
The beneficiaries under the Jan Dhan Yojna over a period of 3 years are estimated to be approximately around 29 crores who have opened their bank accounts with either public sector banks, regional rural banks or private banks having a cumulative balance of roughly 64000 crores in the beneficiary accounts.
• ATAL PENSION YOJNA which was launched in June 2015 is a guaranteed pension scheme administered by the Pension Fund Regulatory and Development authority primarily aimed at the unorganized workers. The scheme aims at helping these workers save money for their old age and guarantees post retirement pension ranging from Rs. 1,000 – Rs. 5,000/- per month. The Government would also contribute 50% of the contribution of Rs. 1,000/- whichever is lower.
The scheme gives the option of decreasing or increasing the pension amount once a year. In case of death the spouse of the beneficiary shall be entitled for the same amount of pension till his or her death and the nominee of the beneficiary thereafter shall be entitled to receive the pension money that the beneficiary had accumulated till 60 years of age. In case of death prior to 60 years, the spouse shall also have the choice to exit the scheme and claim the accumulated amount or continue maintaining the account under the subscriber’s name for the remaining vested years.
• Pradhan Mantri Jan Suraksha Bima Yojana – Inspite of a plethora of insurance companies operating India, their reach to the rural sector is rather limited. PMSBY is mostly aimed at those who are below poverty line and are unable to afford insurance services. The scheme provides for a meagre premium of Rs. 12 per annum deducted from the savings bank account of the policy holder and giving a cover of upto Rs. 2 lakhs in case of death and in case of irreparable loss of both hands, feet, eyes etc.
• Pradhan Mantri Jeevan Jyoti Beema Yojna (PMJJBY) is similar to PMSBY but aimed at the people employed in the unorganized sector and provides for a renewable life insurance cover of upto Rs. 2 lakhs at a premium of Rs. 330 per annum.
• BHARAT INTERFACE FOR MONEY – BHIM APPLICATION is a digital payments solution application based on the Unified Payments Interface which lets its users to send and receive quick and easy payments using a mobile phone and more and more number of banks have started to partner up and support digital transactions via the application. Users can also send money via IFSC (Indian Financial System Code) and MMID (Mobile Money Identifier) Code to users who don’t have a UPI-based bank account. It also provides for an option of creating your own QR (Quick Response) code for a fixed amount of money, which can be used by a merchant to scan and make the deduction from the user’s account.
Key initiates of the Reserve Bank of India
• The Reserve Bank has allowed banks to increasingly utilize the services of Business Correspondents (BCs) which allows for a greater reach in terms of remote areas resulting in an increase in the number of transactions from such areas.
• RBI has also taken steps for providing banking services in unbanked villages having a population of more than 2,000 from 2010-2013 by allotting the same to various banks for coverage through various modes – Branch or BC or other modes such as ATMs, mobile vans, etc. and thereafter opening of banking outlets in unbanked villages with population less than 2,000 from 2013-2016 in a time bound manner.
• RBI has also made initiatives to draw up Financial Inclusion Plans through banks in the public as well as the private sector as an integral part of their business strategy with respect to opening rural brick and mortar branches; Business Correspondents (BCs), opening of Basic Savings bank deposit accounts, issuance of Kisan Credit Cards (KCC) and General Credit Cards (GCC) etc.
• Relaxation of KYC requirements wherein, small accounts could be opened with self-certification in the presence of bank officials along with usage of Aadhaar allotted by the Unique Identification Authority of India and provision of e-KYC services based on Aadhaar thus making opening of bank accounts easier and facilitating access to banking services.
• Priority sector lending certificates launched on April 7, 2016 to facilitate the achievement of priority sector lending targets by banks and in-turn incentivising providing for a mechanism to sell their over-achievement, thereby enhancing lending the said categories. It also enables banks to trade their PSL targets with banks who have underachieved.
• As per the data maintained by the RBI, a snapshot of the progress reported by banks under their FIPs for certain key parameters as on September 30, 2016 is as under:
Rural Banking Outlets
Urban Outlets (through BCs)
Basic Savings A/Cs
(due to PMJDY)
Kisan Credit Cards
General Credit Cards
BC- ICT (Information and Communication Technology) Transactions
• The Reserve Bank has also set up the Financial Inclusion Advisory Committee (FIAC) to review Financial Inclusion policies on an on-going basis.
Steps with respect to Financial Literacy
• The Reserve Bank is in the process of conducting a nation-wide survey to gauge the financial literacy targeting low income groups such as farmers, small entrepreneurs, students, senior citizens etc. and has also undertaken tailored programmes with the help of financial literacy centres with the help of NGOs and use of technology.
• The RBI has also set up a technical group for coordinating the efforts on financial inclusion and literacy at the policy level. Apart from this, a National Centre for Financial Education which includes representatives from various financial sector regulators has been set up to create material on financial education and conducting such campaigns across India to promote financial awareness in different languages through Kiosks controlled from a central location.
• The NCFE in collaboration with CBSE, has prepared financial education workbooks for classes VI to X and steps have been initiated with the various state boards to adopt a similar curriculum.
• The RBI has also taken steps for graded certification for BCs.
• The steps taken by RBI have gone a long way in improving the accessibility of financial services to the underprivileged. The following table enumerates the progress under financial inclusion plans of RBI as on September 2016;
Banking Outlets in Rural locations -Total
Urban Locations covered through BCs
BSBDA-Total (No. in million)
BSBDA Total (Amt. in ₹ billion)
OD facility availed in BSBDAs (No. in million)
OD facility availed in BSBDAs (Amt. in ₹ billion)
KCCs -Total (No. in million)
KCCs -Total (Amt. in ₹ billion)
GCC-Total (No. in million)
GCC-Total (Amt. in ₹ billion)
ICT-A/Cs-BC- Total number of transactions (in million) *
ICT-A/Cs-BC- Total amount of transactions (in ₹ billion) *
CHALLENGES TO FINANCIAL INCLUSION
The steps taken by the Indian Government as well as the RBI have without a doubt brought about a significant change insofar as the access of the lower income groups to the financial and banking services concerned. However, the hoped for results would not follow the concrete efforts made if immediate steps are not taken simultaneously to alleviate illiteracy and educate the rural masses as India still has the highest number of illiterates at around 290 million according to a report published by UNESCO in 2016. As of 2011, according to a report published by a leading news magazine, as of 2011, the enrolment rate for pre-primary schools is 58 per cent and 93 per cent for primary schools. However, among rural children of age 10, half could not read at a basic level, despite the high overall enrolment rate for primary education and over 60 per cent were unable to calculate division based sums, and half dropped out by the age 14.
Lack of education leaves the elderly and the women, most vulnerable to malpractices vis-à-vis digital and financial transactions where such individuals often bank upon their relatives, friends or banking correspondents to avail or make use of financial services. The reports of banking correspondents giving one Personal Identification Number to all the residents of a single village to ensure ease of business reflect the poor state of implementation of these schemes. Furthermore, the inability to of such individuals to understand the working of digital transactions and the processes entailed, have turned out to be a huge roadblock in the effective implementation of these schemes. It is no secret that the Jan Dhan accounts have underperformed largely due to the people belonging to the informal sector being unable to make recurring deposits on account of seasonal, unplanned and uncertain income. The reports of Jan Dhan accounts being used by the rich and powerful in the name of vulnerable individuals post demonetization to deposit old currency expose the loopholes in the financial system of the country. Therefore, financial inclusion schemes would fail to attain the desired objective if the more fundamental problems that are facing the country such as lack of basic education and poverty are not eliminated.
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