Home / Money / Calculators /  All efforts are to make financial inclusion a reality

It is a well-established fact that a large portion of our population is unbanked. And, in 2014, several initiatives were taken to include more people in the formal banking system.

For instance, the government launched its Pradhan Mantri Jan Dhan Yojana (PMJDY), which aims to get at least 75 million unbanked families across the country into the system by opening two bank accounts per household in rural and urban pockets. Furthermore, the Reserve Bank of India (RBI) issued banking licences to two institutions. Here’s a look at what happened this year.

Banking for all

The Jan Dhan Yojana was launched in August, and till 22 December, over 98 million accounts were opened under the scheme. Anyone who opens a bank account under the scheme can get up to 1 lakh accidental cover, 30,000 life insurance and an overdraft facility of up to 5,000 if the bank account is active for six months and is linked to one’s Aadhaar number.

What does this mean for banks? “If you do the math, out of the over 96 million accounts opened till 18 December, about 74% are zero balance. Banks have been able to mobilize only 7340 crore. The cost of maintenance incurred by the bank is 60-85 per account. Right now, these accounts lie in the liability side of the banks’ books. Only if transactions start happening will the banks benefit," said Abhishek Kothari, banking analyst, Quant Broking Pvt. Ltd. It is too early to say how much of the financial inclusion target will be met through these accounts.

More banks

This year, the RBI issued two new banking licences—one to IDFC Ltd, a financial services firm, and the other to Bandhan Financial Services Pvt. Ltd, a Kolkata-based micro-lender—out of 25 applicants. This was for the first time in a decade that banking licences were issued. Analysts says they are likely to start operations in 2015, but are not likely to pose much of a challenge to existing banks since the initial focus would be on aligning their portfolio as per RBI’s requirement, and setting up operations. Hence, new banks will not mean cheaper loans and higher interest rates on deposits.

RBI also issued final guidelines for payments and small banks. According to the guidelines, payments banks can open small savings accounts and accept deposits of up to 1 lakh per individual customer, and provide remittance services as well. These banks can issue automated teller machines (ATM) or debit cards but not credit cards, nor can they lend. Payments banks can also distribute non-risk sharing simple financial products.

Small banks will be allowed to take deposits as well as lend money, just like commercial banks, but the focus will be on small lending. Analysts say it is unlikely that small and payments banks will be rolled out in 2015.

Bill payments

The final guidelines for implementation of Bharat Bill Payment System (BBPS) were released in December. BBPS will be a centralized bill payment system that will allow you to use a single website or outlet to pay your monthly or repetitive bills such as those for phone and electricity.

“This will be a win-win for all stakeholders. Customers would get access to billers without being restricted to tie-ups entered by their bank; banks and aggregators would need to integrate with just a single system. The presence of a standard setting body will bring transparency and a level playing field," said Rajiv Anand, group executive and head-retail banking, Axis Bank Ltd. But, again, it will take at least two years for this facility to become a reality.

Other happenings

Banks, for the first time, have been allowed to charge customers for own-bank ATM usage. From 1 November, banks are allowed to charge if you transact more than five times a month at your own bank’s ATM, and is applicable across the country. Also, in metros, only three transactions will be free at other bank ATMs. The transaction will not be restricted to withdrawal of money. Many banks have either adopted the change or are in the process of doing so. For instance, ICICI Bank Ltd has hiked its ATM charges for savings account customers with effect from 1 January 2015. More big banks are likely to follow suit, while some smaller banks will continue to offer unlimited free ATM transactions.

In the products space, minors above the age of 10 can now open and operate a savings bank account independently. In September, banks launched such accounts aimed at minors.

Some banks are planning to launch contact-less credit and debit cards. SBI Cards and Payments Services Pvt. Ltd is one such. Vijay Jasuja, chief executive officer, SBI Cards, said they will offer these cards once RBI approves guidelines. “These cards will work on secure protocol and will be useful at retail and mass transit locations where fast checkout is required. With near field communication technology, cardholders only need to wave their cards in front of the readers at the merchant outlets," explained Jasuja.

A lot of what has been started in 2014 will come to fruition either next year or later. But the way we bank is set to change.

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