Modi set to revamp fin inclusion; to unveil new scheme on Aug15

Prime Minister Narendra Modi is set to give a big boost to the ongoing financial inclusion drive by unveiling a comprehensive programme, to be announced at the Red Fort in his address to the nation on the Independence Day.

The proposed comprehensive financial inclusion programme envisaging insurance and pension cover, apart from a default cover for lenders is likely to envisage opening 15 crore more bank accounts, 12 crore of which will be in rural areas over next four years, according to a note sent to the Indian Banks Association (IBA) by financial services Secretary G S Sandhu.

According to the note, Modi's new comprehensive financial inclusion programme has three major shifts from the one pursued by the previous government.

First, the earlier efforts at financial inclusion had villages as the unit for coverage while the present plan focuses on coverage of households. Secondly, only rural areas have been the focus so far while both rural and urban areas have been included now, says the ministry note.

Thirdly, the present plan is proposed to be implemented as a 'mission mode' project. It envisages a comprehensive coverage of all excluded households by a six-pillar approach in two phases, according to the note.

The first phase of the programme, which begins from August 15 this year and ends August 14, 2015 will provide basic banking accounts with overdraft facility of Rs 5,000 and RuPay debit card with inbuilt accident insurance cover of Rs 1 lakh and creation of credit guarantee fund for coverage of defaults in overdraft accounts, according to the ministry.

The second phase, which will begin on August 13, 2015 and conclude by August 14, 2018, will cover micro-insurance and unorganised sector pension schemes like Swavlamban.

When contacted, IBA said already state-owned banks, insurers and regulators are working overtime to ensure a smooth kick-start.

"We are currently busy chalking out the modalities of implementation of the project, which will be implemented in the entire country after it is declared by the Prime Minister on August 15," IBA Chairman K R Kamath, who is also the Chairman of Punjab National Bank, told PTI.

It's a good scheme as it envisages going beyond the geographical boundaries and promises of connecting each and every household, he said, adding more than being commercially viable, it is important to link every household with the banking system.