July 29--MUMBAI/NEW DELHI -- Bank accounts for every Indian and banking services within 5km of every town and village, and all by March 2016 -- that's the ambitious financial inclusion plan Prime Minister Narendra Modi will likely detail in his Independence Day speech.
Named Sampoorn Vittiyea Samaveshan (SVS), the scheme has been sketched out in a paper prepared by the department of financial services. Mint has reviewed a copy.
In his budget speech, finance minister Arun Jaitley announced the National Democratic Alliance (NDA) government's intention to launch a financial inclusion mission on 15 August that would provide banking services to all households in the country, and especially focus on women, small and marginal farmers and labourers.
According to Census 2011, 59% of the 246.7 million households in India have access to banking services; 54% of the 167.8 million rural households in India have access to banking services, and 67% of the 78.9 million urban ones do.
Jaitley will meet chiefs of state-run banks on Thursday to discuss the preparedness of banks to roll out the government's financial inclusion plan, bankers and a government official said.
"The meeting is mainly to review how banks are gearing up for the rollout of the financial inclusion mission," said the government official, who did not wish to be identified.
The financial inclusion plan will look to provide universal access to banking facilities with a basic bank account with an overdraft facility of Rs.5,000 and a Rupay-enabled debit and ATM card with inbuilt accident insurance cover of Rs.1 lakh.
"This account would be linked with the Aadhaar number of the account holder and would become the single point for receipt of all government benefits," the paper said.
Rupay is an Indian government initiative and the country's own equivalent of Visa and
Account holders will also receive financial literacy training sessions and, on completion of these training sessions, a Rs.5,000 overdraft limit. According to Reserve Bank of India estimates, 182 million zero balance accounts had been opened in India up to March 2013, but only 3.95 million of these availed overdraft facilities adding up to Rs.155 crore.
The approach paper, dated 16 July, outlines six pillars upon which the entire programme will be based. The financially excluded should be provided universal access to banking facilities, the paper said.
They should have basic bank accounts and should be provided microcredit, microinsurance and unorganized sector pension facilities, it added. The borrowers under this scheme will undergo financial literacy training, while the entire loan portfolio should be insured against a credit guarantee fund, with an initial corpus of Rs.1,000 crore, which will provide for defaults on such accounts, it said.
To achieve these objectives, the government is open to public-private partnerships while it will also tap into the existing national infrastructure of post offices and the future payments banks network, according to the approach paper.
Various microcredit organizations will be allowed to compete with each other while the crucial role will be played by the business correspondents (BCs), or agents of banks who reach out to the last mile, offering simple credit and deposit products to customers.
According to S.S. Mundra, chairman and managing director of
"We already have 6,000 business correspondents, and they are doing a very good job. If need be we will hire more such BCs," Mundra said, adding that banks' own resources won't be stretched much because the bank staff will largely play a supervisory role.
"This is not a big task because most of the job has already been done by banks. Accounts are being opene