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Jan Dhan gives fillip to government's mission of financial inclusion as more people sign up

Economic Times:  July, 2015

Mumbai: The government's mission to provide a bank account for every household and social security schemes for the poor is slowly taking root, with more people signing up for them, improving the prospects of achieving financial inclusion for all.

In addition, the share of bank accounts with a zero balance has fallen to about half of the total under this initiative compared with as much as 76% in October last year. According to data from the Pradhan Mantri Jan-Dhan Yojana website, 16.9 crore accounts were opened as of July 15 across public, private and rural regional banks with a combined balance of Rs 20,288 crore. The share of zero-balance accounts has come down to 50.6%, suggesting that account usage is increasing.

"The implications are — one, a big push for the government's financial inclusion drive; two, advance the initiative to move towards a cashless economy," said Saugata Bhattacharya, chief economist at Axis Bank.

"This will enable the government to implement direct transfers of subvention outlays, thereby reducing the extent of leakages. All of this should increase systemic efficiency adding to the country's growth prospects." There is a two-fold increase in the number of accounts opened from 6.87 crore accounts with a balance of Rs 5,180 crore at the end of October.

"The Jan-Dhan initiative will slowly encourage the habit of saving," said Ashish Das, a professor at the Indian Institute of Technology Bombay, who steered financial education initiatives by the finance ministry. "The share of zero balance would go down further as the government moves towards complete transfer of subsidy funds into bank accounts, minimising leakages."

Subsidy for liquefied petroleum gas (LPG), used for cooking, is now credited to the conconsumers' bank accounts. Previously, LPG cylinders were be sold at subsidised rates. Three social security schemes — Pradhan Mantri Suraksha Bima Yojana (PMSBJ), Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and the Atal Pension Yojana (APY) — have also got subscribers.

As of July 14, about 2.7 crore people have registered for the Pradhan Mantri Jeevan Jyoti Bima Yojana, which provides life cover of Rs 2 lakh at an annual premium of Rs 330.

The general insurance policy, or Pradhan Mantri Suraksha Bima Yojana, which insures accidental death and disability at Rs 12 a year for a cover of Rs 2 lakh, has attracted 7.8 crore people, according to government estimates. About 4.7 lakh subscribers have joined the pension scheme.

"Out of the three schemes, the general insurance policy is doing well under the Jan-Dhan programme because of low premium," said a senior executive of New India Assurance Co. The life insurance policy can be bought by people up to the age of 50 and the accident cover by anyone between 18 and 70 years.