RBI cautions banks against jan dhan accounts replication

The Reserve Bank of India (RBI) on Monday cautioned banks against duplication of bank accounts in their quest to achieve high targets under the newly launched pradhan mantri jan dhan yojana.

“When we roll out the scheme, we have to make sure it does not go off the track. The target is universality, not just speed and numbers,” RBI governor Raghuram Rajan said addressing a Ficci banking conference.

“The system is going to be a waste if we generate a set of duplicate accounts, like the same guys already have accounts in cities and we give them new accounts too. It is going to be a waste if we do not have full coverage like if 75 million households do not get accounts but somebody else gets. It’s going to be a waste if the accounts are not used, they open and they languish. Many of the persons who are coming into the system are coming for the first time, so if we don’t make a good first impression, they will stay out. Let us ensure it works,” Rajan said.

He said that the RBI would work with the lenders to ensure that this does not happen and to improve the effectiveness of the scheme.

Led by the country’s largest lender State Bank of India, banks have opened over 3.02 crore basic accounts within a fortnight of the launch of the scheme on August 28. Of the accounts opened, 1.89 crore are in rural areas and 1.13 crore are in urban areas.

Rajan maintained that the scheme is “good and worthwhile” which will lead to a slew of benefits. “if we can bring 7.5 crore excluded households into the system, it would enable us to do tremendous service,” “Clearly, universal financial access has to be a national priority. Certainly, it is something well worth for the government to push. You can get a tremendous increase in rural savings,” Rajan said, adding that the rural savings rate stands at a low 10 per cent now.

Other advantages of the scheme include facets like direct benefit transfer (DBT) that will plug leakages in the system and thus help the government save on subsidies with better targeting. It would lead to more empowerment of the beneficiaries and reduce the cash component in the economy, he said.

The pradhan mantri jan dhan yojana is a mega financial inclusion plan under which bank accounts and RuPay debit cards with an inbuilt insurance cover of Rs one lakh and an overdraft facility of Rs 5,000 will be provided to crores of people with no access to formal banking facilities. Those who open accounts by January 26 will also get a life insurance cover of Rs 30,000. Banks have been asked to open 7.5 crore accounts by January 2015.

The PMJDY has been conceived as a national mission on financial inclusion with the objective to cover all households in the country with a bank account. While India has grown to become Asia’s third largest economy, currently more than 10 crore households do not have a bank account leaving them dependent on moneylenders and other informal financing routes.