Govt. to launch new program of financial inclusion: Jaitley (Update)

Union Finance Minster Arun Jaitley said Thursday that the government is going to launch a new program of financial inclusion in mission mode which will provide households with facilities of savings, credit, remittances, insurance and pension among others.

He said that this is a marked shift from earlier effort where only opening of account was the focus of the financial inclusion drive.

Jaitley was speaking after holding a meeting with the chief executive officers (CEOs) of public sector banks (PSBs) and financial institutions (FIs) here today.

Jaitley further said that this time the government is targeting the individual households rather than the village. He said that there are 7.5 crore households in the country who do not have bank account so far.

He said the government is targeting that every village should get a banking facility within a reasonable distance and that every household should have at least one bank account within the time frame of one year.

"This is a big challenge and there are several difficulties like lack of connectivity and infrastructure facilities etc," the minister added.

Jaitley said: "In our country, where we have very low levels of financial literacy, it is essential that people understand the importance of availing financial services which will enable them to participate in the growth story. Therefore, financial literacy will receive a special emphasis in this new programme of financial inclusion."

He said that technology has made rapid strides in recent times, and therefore, the government must use technology, especially mobile based services in a big way to achieve the desired results. The government has integrated provisions of access to banking facilities, account opening, financial literacy, credit availment, micro insurance and pension, he added.

The financial inclusion mission has two phases starting from 15th August this year. The first phase will get over by 14th August, 2015 and the second Phase by 14thAugust, 2018. Most of the activities will be done in Phase - I and insurance and pension would be covered in Phase - II.

Jaitley said that the primary method of branchless banking has been that of the business correspondents. It is therefore important to ensure that the Business correspondents have a viable business model and for this purpose, the government has decided to encourage transfer of subsidies directly to bank accounts of the beneficiaries.

He added that the previous efforts did not involve the state government and the district administration. He said that this time the state governments have been requested to achieve this ambitious task. There would be state level and district level committees to monitor the progress under the plan, he stated.

Jaitley said there was no pull factor in the earlier campaign where people could demand access of banking facilities in their villages. He added that under the ission, there would be awareness generation amongst the people so that they can ask for opening of their bank accounts by the banks and the business correspondents.

He stated that in the past, the Know Your Customer (KYC) process was very cumbersome. This has now been eased and the e-KYC facility has been introduced in the banks.

The meeting was attended among others by G.S. Sandhu, Secretary, Department of Financial Services, Deputy Governor, Reserve Bank of India, Snehlata Shrivastva, Additional Secretary, Department of Financial Services, public sector banks and financial institutions CEOs, and senior officers of the Ministry of Finance.