India’s Push for Banks for All Leaves Some Still Outside
Thursday, April 9, 2015
Firozaben, a nurse at an upscale clinic here, opened an account at the state-owned Bank of Baroda Ltd. in December, attracted by the promise of an overdraft provision and accident- and life-insurance policies—all for no fee, courtesy of a government program to bring India’s masses into the banking system.
The same month, Mohammad Assalam Ansari, a tailor, traveled to an account-opening “boot camp” run by the bank. He says he had to pay 100 rupees before a clerk would give him an application form. Despite this, he says his application was rejected; he isn’t sure why.
Their stories reflect both the promise and the weakness of an ambitious program by Prime Minister Narendra Modi to widen access to financial services to the country’s poor. The goal is to make India less cash dependent, shrink the black economy, reduce corruption and boost growth.
The government labels the program—called the People Money Scheme, or Jan Dhan Yojana—a resounding success, saying 135 million new bank accounts have been opened, well above the target for 75 million at the program’s launch in August.
Crediting incentives and a system of local agents acting as bank branches, Mr. Modi claims that now virtually every household in India has a bank account. The program, known as PMJDY in India, even earned a Guinness World Record for opening the highest number of bank accounts in one week.
Economists have lauded the program. “What’s extraordinary about the scheme is its drive and speed,” said Kabir Kumar, a financial-inclusion expert at CGAP, a World Bank-backed think tank. “Nothing like this has ever been attempted before.”