Commitment made at meet between representatives of 25 large microfinance firms, banks and govt officials
Mumbai: Microfinance companies have committed to opening at least 30 million bank accounts within a year through tie-ups with banks as part of the government’s ambitious financial inclusion plan likely to be announced on Independence Day.
The commitment was made at a meeting on Monday between the representatives of 25 large microfinance companies and banks and government representatives, including financial services secretary G.S. Sandhu.
According to Sadaf Sayeed, chief operating officer at Muthoot Mahila Mitra, a microfinance company of Muthoot Fincorp Ltd, who was present at the meeting, the target to open 30 million accounts is an initial estimate.
“Around 80% of our borrowers do not have a bank account, but all have a credit bureau record; so, opening of accounts is not a problem. The government intends to use these accounts for direct cash transfers and link them to Aadhaar for eKYC (electronic know-your-customer rules). Microfinance companies will also integrate data with core banking solutions of banks," Sayeed said.
The government may have to open anywhere between 75 million and 150 million accounts, depending on how many accounts each household gets, Mint had reported on 31 July.
Confirming this target, Alok Prasad, chief executive officer of Microfinance Institutions Network (MFIN), an industry body, added that microfinance firms will also work on improving financial literacy, which is part of the government’s six-pillar strategy for financial inclusion.
On 28 July, Mint reported that the government’s financial inclusion plan will look to provide universal access to banking facilities with a basic bank account with an overdraft facility of ₹ 5,000 and a RuPay-enabled debit and ATM card with an accident insurance cover of ₹ 1 lakh. RuPay is a debit card payment network launched by the government in 2012.
“Based on how the discussions progress, the microfinance industry could also provide collections support to the banks as they roll out the ₹ 5,000 credit limit with a RuPay card, as envisaged under the national mission," Prasad said.
A general manager with a public sector bank who was also present at the meeting on Monday said the government plan includes allowing microfinance companies to access banking infrastructure which will help speed up the financial inclusion drive.
“Microfinance companies will now use banks’ technology platform and, hence, the transactions which they did by cash so far will be done through banks. In the first year, the programme will cover three aspects—opening accounts, maximizing reach and spreading financial literacy," the banker said while requesting anonymity because he is not authorized to speak to the media.
According to Census 2011, 59% of the 246.7 million households across India have access to banking services—54% of the 167.8 million rural households and 67% of the 78.9 million urban households.
Once the mission is launched, its progress will be reviewed quarterly by the finance minister, rural development minister and the minister for communication and information technology. In addition, the financial services secretary will review the progress with bankers every month.