January - March 2015

Banking the Unbanked – Economic Empowerment to Every Citizen

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Well begun is half done. As the government gears up to cover every household in the country under banking services, the commendable achievement of opening bank accounts under PMJDY is just the first step. In future we will witness a plethora of products and services to reach every citizen as the journey unfolds for financial inclusion revolution in India

Banking-UnbankedIndia reached a landmark number in its first step towards holding the promise of financial inclusion and economic empowerment to every citizen of the country. This was only made possible by the collaborative efforts of central government, state governments and bankers that have ensured that each household is included in the banking ecosystem. Applauding the commendable achievement of the Pradhan Mantri Jan Dhan Yojana (PMJDY), Hon’ble Prime Minister Narendra Modi applauded the bankers on the extra-ordinary success of opening 11.5 crore new accounts in an extremely short time period and reach a coverage of 99.74 percent of all households in the country.

And this is just the beginning of a revolution that is waiting to unfold to achieve the vision of financial inclusion in India. Efforts have already started to activate these accounts and offer variety of credit, insurance and pension services. And, the country will see banking, financial services and insurance (BFSI) sector play a pivotal role in nation building in the coming years.

Transactions Push

Financial services should be made available for all sections of society. Now with the basic requirement being met by the banks, the next focus should be on financial literacy to make these account holders aware of the products and services that are coupled with the account. As of January this year, 11.43 crore accounts were opened by banks across the country. And of this, 8.24 crore accounts had zero balance. Going forward the push for citizens doing transactions will really be the parameter of success for banks. These will be either through a banking branch or an ATM. The PMJDY already has mention of issuance of RuPay card that allows him to withdraw at ATMs. This ensures the basic tools for doing transactions is made available to every citizen. The next step is to get cash flowing into these accounts and for this the Direct Benefit Transfer (DBT) of selected government schemes have already started and are being deposited in the bank accounts of beneficiaries. The benefit of Adhaar card as an authentication tool to verify a beneficiary has also been widely implemented. As more accounts gets seeded with their respective accounts numbers there will be seamless cash flow under government schemes from the respective departments directly to the bank accounts. A major boost for bringing transparency, accountability and quicken the time for benefits to reach the beneficiary. It is only a matter of time that with large scale aggressive financial literacy campaigns on the ground, the citizen will realize the many advantages of being part of BFSI ecosystem.

Maharashtra – Leading the Way

As the second largest state in India both in terms of population with 11.24 crore and with high percentage of urbanisation, the state has close to 55 percent of the state population dependent on agriculture and allied services. Thus it is no surprise that the state has a large network of co-operative banks that cater to the needs of urban and rural poor with financial services. More so, the branch networks and banking penetration are only increasing per year, further as per the RBI guidelines, the banks are now required to open 25 percent new branches in the unbanked areas.

The state government has always laid its focus on reaching the last mile and more so on banking penetration. The mission of financial inclusion is spearheaded by the state level bankers committee (SLBC) and they have opened more that 73 lakh accounts under Pradhan Mantri Jan Dhan Yojana (PMJDY). UIDAI have also provided e-KYC facility for opening of accounts. The state has taken all the required measures to increase the penetration of bank accounts and have declared that the Maharashtra could be considered saturated. The Rupay cards have been issued to 61 lakh accounts and aggressive steps are on to achieve complete coverage. The state with its high number of Adhaar enrollments gives way to an easy seeding of bank accounts and come under the Direct Benefit Transfers (DBT) ecosystem. The focus of the state government is now to expand the reach of banks and ATMs to the last mile to ensure that each beneficiary is able to carry out transactions and contribute to the economy.

The mission of financial inclusion is spearheaded by the state level bankers committee (SLBC) in Maharashtra and they have opened more that 73 lakh accounts under Pradhan Mantri Jan Dhan Yojana (PMJDY)

Inclusion Revolution

The central government has put on paper an aggressive strategy and challenging deadlines to push the efforts of the state government and banks and achieve 100% coverage of households with bank accounts. This was the prime disability that was keeping most of the rural and marginalized excluded from the benefits of financial services offered by the banks. The revolution will come into force when each citizen will use these accounts for their financial needs and make transactions, have savings, insurance and avail government benefits seamlessly using just a single bank account. The movement of cash economy being channelized through the banking ecosystem will also convert much of the informal economy into the formal channels. The future holds many opportunities and challenges, only consistent and sustainable efforts of all the stakeholders including banks, government and citizens together will help realize this dream for inclusive society.

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