PM Narendra Modi to kick off pan-India financial inclusion plan in late August

Prime Minister Narendra Modi will launch a nation-wide financial inclusion campaign by the month-end to provide banking, insurance and pension covers to 7.5 crore households and will also rope in non-banking finance companies (NBFCs) to widen the coverage. Modi will announce the National Mission on Financial Inclusion in his Independence Day speech, and kick off the project in the Capital either on August 28 or 29. The Reserve Bank of India has allowed NBFCs to act as business correspondents and open bank accounts, which is expected to bolster the government's plans to reach remote parts of the country, senior government officials said.

As a sweetener, the finance companies will be allowed to tap into the pool to offer loans and other products since the firms are banned from accepting deposits.According to the plan, the government aims to provide banking facilities to up to 15 crore individuals by 2015 in all areas except those facing connectivity and infrastructure bottlenecks. These segments are expected to be covered in the second phase of the National Mission on Financial Inclusion starting 2015.

A basic bank account with Rupay debit card would be opened. This would have an inbuilt accident insurance cover of Rs 1 lakh. While the plan is to allow banks to offer an overdraft of up to Rs 5,000 with every bank account after six months, banks may be given the option to offer the facility later once they have complete financial profile.

CASH TRANSFERS
The finance ministry and banks expect the fresh attempt to give the financial inclusion plan a real boost once cash transfer for subsidy payments for cooking gas, fertilizers and kerosene makes a comeback. The government is keen on using the Aadhar platform and the banking coverage to overhaul the subsidy payment system and banks are awaiting a cue from the government, which may be available in Modi's speech on August 15.

The plan being readied involves mapping the country's six lakh villages into sub-service areas of 1,0001500 households. These service areas would be allotted to banks to provide at least one fixed point banking outlet -either a branch or a business correspondent, to be called Bank Mitra. Financial literacy programs would be conducted in villages and the plan will provide micro-insurance. Unorganized sector pension schemes such as Swavlamban would be through business correspondents. Farmers, who hold kisan credit cards, will be given RuPay Kisan cards as the government study has shown that a large number of farmers are not covered under the Kisan credit card scheme. With the Modi government's emphasis on cooperation with states, the financial inclusion plan will lean heavily on provinces for effective implementation.

The central government has written to state governments, seeking their active participation in the mega financial inclusion plan. States have been asked to appoint senior officers to the state-level bankers committee as well as state-level mission directors.

The government is also considering special incentives for district collectors who achieve full coverage within a year and has asked banks to prepare an action plan under which districts can be declared fully covered on a quarterly basis..

GAPS IN EARLIER MODEL

The Modi administration wants to implement the program on a mission mode, with the monitoring mechanism headed by finance minister Arun Jaitley. A review of the earlier financial inclusion programs has pointed to gaps in implementing the scheme. Villages with more than 2000 population were covered, which limited the geographic spread.

There was no emphasis on urban financial inclusion. The focus was on coverage of villages and not on households and emphasis was on opening large number of accounts which have remained dormant. The earlier plan did not have financial literacy, micro-insurance, debit card and pension for the unorganized sector.