OPINION: Are the RBI and Indian government headed for a face-off?
Monday, September 29, 2014
On Sunday, speaking at the Madison Square Garden in the US, Prime Minister Narendra Modi said banks have garnered Rs 1,500 crore deposits so far in over 4 crore accounts opened under the Pradhan Pradhan Mantri Jan Dhan Yojana launched on 28 August.
The scheme, aimed at opening at least one bank account for every family in the country in less than six months, is something the prime minister has so far projected as a major achievement of his government during his first 100 days in office.
What Modi wanted is to kick off a banking revolution in the country by extending the reach of no-frills accounts to millions of poor in remote areas. Stated intention is ambitious but the sheer hurry and absence of adequate back-up mechanism in place, could give Modi the work of many more years to set what he possibly didn’t do right in the first 100 days.
The subject here is the much-hyped Jan Dhan Yojana, launched by Modi on 28 August, with the stated intention of bringing in crores of poor households to the formal banking fold. Under the plan, banks were asked to expand the number of basic bank accounts by at least 7.5 crores by the end of January 2015 to meet the targets given by the new government.
To be sure, Modi’s stated intention was noble since about half of the country’s adult population still do not have access to formal banking sector, forcing them to turn to the local money lender to fulfil their banking needs. In that sense, efforts to promote financial inclusion are a must for the country.
One of the much-highlighted objectives of the plan is to use these accounts for the transfer of government benefits to the beneficiaries such as subsidies and other cash transfers. But a bank account only to facilitate government benefits to poor would hardly lead to the true sense of financial inclusion.