‘Financial inclusion meaningful only when backed up by social security’

Financial inclusion becomes meaningful when backed up by social security measures to all sections of people, especially the underprivileged.

This is why the Prime Minister’s Jan-Dhan Yojna (PMJDY) becomes special. Launch of three social security schemes make it more relevant than other financial inclusion programmes attempted in the past, says V Prabhakaran Nair, General Manager, Kerala State Cooperative Bank, and author of two books on banking in Malayalam.

Up to 40 per cent of the population did not possess bank accounts despite these programmes. But the PMJDY has already raised ₹15 crore, bypassing the ₹10-crore target set for banks for the first year.

Launched on August 15, 2014, it aimed opening a banking point – either bank branch or business correspondent – at every habitation within a five-km radius across the country (except 82 naxal-infested districts).

Every unbanked household will now get a bank account, an ATM-enabled Rupay card, a life insurance cover of ₹3 lakh, an accident insurance cover of ₹1 lakh and an overdraft facility of ₹5,000.

But ‘inclusive financing’ is not new to this country. Earliest attempts could be traced to the days when 14 major banks were nationalised in 1969 and six others in 1980.

For instance, the DIR loan scheme provided small ticket loans to those below poverty line at concessional interest of four per cent.

Other instruments tried out include priority sector lending, lead bank scheme, branch expansion, self-help groups and regional rural banks.

The term ‘financial inclusion’ was used in the credit and monetary policy of the RBI in April, 2005. Various tools have since been developed to support financial inclusion and bank linkage.

No-frill accounts, relaxation in KYC norms, business correspondents, technology-enabled products, branches in unbanked centres, financial literacy centres and direct benefit transfer are among these.

Even with all this, 40 per cent of the population did not have a bank account. It is in this context that the PMJDY and the three social security schemes – Atal Pension Yojna, Pradhan Mantri Jeevan Jyothi Bima Yojna and Pradhan Mantri Suraksha Bima Yojna – make a difference, says Nair.

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