FinMin finalises premium payment for life cover under Jan Dhan Yojana

It has been decided to set aside Rs 50 cr from Social Security Fund

The finance ministry, in consultation with the Life Insurance Corporation of India (LIC) has finalised the arrangement for payment of premium towards life insurance cover under the Pradhan Mantri Jan Dhan Yojana.

It has been decided to set aside Rs 50 crore from the Social Security Fund, managed by LIC and worth about Rs 1,800 crore, sources said.

This would be a revolving fund and LIC would manage it, sources said, adding that Finance Minister Arun Jaitley is likely to approve the arrangement soon.

A Social Security Fund (SSF) was set up in 1988-89 for providing social security through group insurance schemes to the weaker and vulnerable sections of society. The SSF is administered by LIC for meeting insurance requirements of the segment.

Under the Jan Dhan Yojana,  anyone who opens an account before January 26, 2015, would get Rs 30,000 life insurance cover. This benefit was added by the Prime Minister Narendra Modi when he launched the scheme on August 28.

Under the scheme, banks have opened 30.2 million accounts as of September 8, 2014, and mobilised about Rs 1,500 crore. Of the total accounts opened, 18.9 million are in rural areas and 11.3 million are in urban areas.

Banks have collected deposits of Rs 1,496.51 crore under the scheme so far which works out to Rs 495 per account.

In order to spread financial inclusion, banks have been asked to open 75 million accounts by January 26.

The scheme envisages to provide one account to 150 million unbanked households across the country in the first phase. For this, banks have been asked to set up camps from 8 AM to 8 PM on every Saturday to facilitate the opening of accounts.

Two helplines — 1800-180-111 and 1800-110-001 — have been set up to answer queries related to the scheme.

The new scheme, sources said, is a significant improvement over the UPA's financial inclusion programme. The earlier scheme had no focus on households and no emphasis was given on urban financial inclusion, according to some experts. Besides, they maintained there was a cumbersome Know Your Customer (KYC) formality, restricting account opening.

Other deficiencies cited include lack of credit disbursement and 47 per cent of business correspondents being untraceable, resulting in inactive accounts.

The new scheme, sources said, has tried to address all the possible deficiencies and its monitoring would be done at state and district levels.

The 'mission mode' approach has been envisaged with the finance minister as head of the mission.