Modi embraces the poor of India

Sameer Kochhar, Editor-in-Chief, INCLUSION & author of best-seller, ModiNomics

With the launch of Pradhan Mantri Jan Dhan Yojana (PMJDY), it is time for the poor of India to rejoice. Every time Narendra Modi speaks of Jan Dhan, the product-on-offer gets better. Encouraged by the financial sector’s performance that succeeded in opening 1.5 crore accounts, as Modi announced the rollout, he pre-poned the target of achieving complete financial inclusion by 26th January 2015 instead of 15th August 2015, announced earlier.

Now a Rs 30,000 additional life insurance cover (as an incentive for all accounts opened before 26th January 2015) has been added from what must have been a very squeamish LIC and even more sore IRDA Chairman, both of which have had no love lost with the goals of micro-insurance and have mostly considered it a heavy burden.

Also unhappy may be RBI and Nachiket Mor, as this plan takes the wind out of the lucrative payments market that was being eyed by telecom companies and other aspirants of payment banks as per the Mor Committee report that was accepted by RBI. Now, a hair splitting exercise is on by vested interests to target these on just above the poverty line families who do not get DBT (the argument itself is flawed as everyone in India gets subsidy – from kerosene to LPG). Such devious intentions must not succeed and Jan Dhan must be made into a universal banking service.

The scheme addresses the supply-side issues very well and the phase II must focus on demand-side issues that include SHG, JLG linkages and economic empowerment. Financial Inclusion without poverty-alleviation is meaningless.

The biggest gap in the scheme that needs to be addressed on an urgent basis is that the Department of Posts (DoP) to be granted a full-banking license as against a payment bank one. One must always remember that unlike the account-centric approach followed by the UPA (whether these bank accounts were used or not), Jan Dhan actually targets access to credit, insurance and subsequently pensions.

A few improvements could still be made, for instance, increased focus on branchless banking, i.e., Bank on Wheels. These experiences have been very successful whether attempted by a bank or an insurance company. The financial viability of the scheme as a for-profit business could still be a question as several reports in the past have recommended a 3 per cent transaction fee instead of the 2 per cent on offer.

A need for targeted interventions towards women, disabled, SC/ST and other marginalised for livelihood-linked credit is very pronounced.

I guess, these are problems for another time as only a step-by-step approach can give desired results. For now, the poor of India can rejoice as deliverance from financial un-touchability is in sight.

(Sameer Kochhar can be reached at

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