You are here: Home » Economy & Policy » News
Business Standard

Govt eyes 200 mn new bank accounts in a year

Govt is using Census 2011 as basis for charting out its financial inclusion plan

Abhijit Lele  |  Mumbai 

The Narendra Modi government will ask banks to open 200 million accounts in a year from this Independence Day.

The Sampoorn Vittiya Samaveshan Mission aims not just to open bank accounts but to provide people access to other financial services like insurance and pension.

Financial Services Secretary G S Sandhu had two rounds of discussions on this with bankers in the last week of June and early July, said a public-sector bank executive who did not wish to be named.

  • The plan: Opening 200 mn new bank accounts in a year
  • Rs 5,000: Instant overdraft for account holders completing a financial literacy programme
  • Defaults: To be covered by the Credit Guarantee Fund
  • Mar 2017: Deadline for micro-insurance facility
  • Rs 1,700 cr: Estimated bill for the one-year rollout plan
  • 60,000: New bank mitras required to be appointed
  • Credit & income growth: To moderate for banks

The task force set up to monitor the progress of the scheme includes the finance minister, the Reserve Bank of India governor and the chairmen of the Insurance Regulatory Development Authority and the Pension Fund Regulatory and Development Authority.

The government is using Census 2011 as basis for the financial inclusion plan. Of the 246.7 million households in the country, 144.8 million have access to banking.

Another bank executive who did not wish to be named said it was a huge task to open two accounts in each unbanked household between August 15 and August 14, 2015.

Banking sub-service areas in districts will cater to 1,000-1,500 households to ensure there is a bank within 5 km of every house by March 2016. In all, about 600,000 villages will be brought into these sub-service areas.

In 2013, 14 state-run banks set up 7,840 branches across the country, one in four in the countryside. Bankers said given staff constraints and the viability of opening full-fledged branches in rural centres, demand for branch expansion far exceeded supply. Banks will rope in 60,000 banking correspondents - retired government and bank employees; post offices and kirana shops - to assist in the plan.

The cost of the one-year plan is pegged at Rs 1,700 crore. Wages will take up Rs 1,200 crore. Promotion expenses, merchandising and infra will cost another Rs 500 crore. The National Bank for Agriculture and Rural Development is expected to chip in with Rs 1,000 crore and the rest will come from banks.

Account holders completing a financial literacy programme will get instant overdrafts of Rs 5,000. Welfare benefits will flow into these accounts, reducing the chance of accounts turning dormant.

There is also a proposal to set up a credit guarantee fund to cover defaults from such borrowers. Besides, insurance up to Rs 50,000 will be provided. The government could contribute Rs 1,000 a year in each National Pension Scheme account into these accounts, bankers said.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Wed, July 09 2014. 00:57 IST