Govt tells banks to open accounts for the unbanked by month-end

New Delhi: The finance ministry has written to banks asking them to open accounts for the unbanked by 30 November as the government tries to step up financial inclusion to deal with the aftermath of partial demonetisation.

In a letter dated 25 November, the ministry asked banks to activate their entire machinery including bringing in retired bankers, business correspondents and financial literacy and counselling centres to ensure all the workers in the organized and unorganized sectors have bank accounts by the end of this month.

“In order to facilitate financial inclusion of workers and to ensure timely payment of their wages, it has been decided to launch a campaign to open bank accounts for workers of the organized and unorganized sectors who do not have any bank account as of now. It has, therefore, been decided to organize special camps for this purpose, starting from 26 November,” said the letter.

Mint has seen a copy of the letter.

Banks have been asked to collect the Aadhaar and the mobile number of the account holder “wherever possible”. These accounts will be opened on the lines of the Pradhan Mantri Jan Dhan Yojana and will have minimal know-your-customer (KYC) requirements. Banks have been asked to work with the district collectors, central and state government officials to ensure these bank accounts are opened by 30 November.

Analysts, however, say this may be a bit too ambitious and may further burden the already strained banking system.

Y.P. Issar, former general manager at Punjab National Bank, said it is a well-intentioned move of the government, though it is possible that the entire drive may take longer. 

“One needs to see how many people still do not have bank accounts. The problem of opening bank accounts will be mainly with migrant labourers who do not have a local address. The other problem is that the number of branches in rural areas is very less as a proportion of the number of villages,” he said.

“It will take more time but the focus will come back on opening of bank accounts. A move towards cashless economy will not happen unless people have bank accounts,” he added.

The push for ensuring bank accounts for the unbanked happened a day after the government stopped the exchange of old Rs500 and Rs1,000 notes at banks and post offices, leaving people with no bank accounts living in rural areas with little option but to travel to the nearest Reserve Bank of India (RBI) offices.

Following Prime Minister Narendra Modi’s announcement on 8 November declaring old Rs500 and Rs1,000 bank notes as illegal tender, the government, RBI and banks have struggled to ensure adequate cash is available to people, especially in the rural areas.

To tide over the cash crunch, the government has been looking for ways to encourage people to move towards cashless transactions including encouraging electronic payments by waiving transaction charges

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.