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Home >Politics >Policy >Jan Dhan Yojana will help eradicate poverty: Narendra Modi

New Delhi: The Pradhan Mantri Jan Dhan Yojana will aim to get rid of financial untouchability, help eradicate poverty and encourage Indian households to save more, Prime Minister Narenda Modi said on Thursday, after launching the ambitious financial inclusion programme in the national capital.

The government hopes to cover more than 75 million households under the plan by 26 January 2015 earlier than the previous target of 15 August 2015. The mission was launched across the country by various cabinet ministers, chief ministers of states and members of Parliament.

The Jan Dhan Yojana is the first big mission launched by the Modi government after it assumed office in May. Initially spelt out by finance minister Arun Jaitley in his budget speech, the financial inclusion programme was announced by Modi during his Independence Day speech.

The mission aims to provide at least one bank account for every household, along with an overdraft facility of 5,000 after the initial six months, a RuPay debit card and a personal accident insurance of 1 lakh. The government has roped in banks, their business correspondents and telecom companies as it tries to extend banking coverage to the entire population.

As an incentive for customers to open bank accounts before 26 January, the Prime Minister announced a life insurance cover of 30,000 in addition to the personal accident cover.

“We need to get rid of financial untouchability. Everyone should have access to a bank account so that they do not have to go to a money-lender and get loans at five times the rate. Only then can we break the vicious cycle of poverty," the Prime Minister said adding that the mission will financially empower women.

Taking a dig at the record of previous governments, Modi said that when banks were nationalized in 1969, it was done with the objective of bringing people into the economic mainstream. “But that objective has not been achieved till date. After 68 years of independence, not even 68% of India’s population has access to banking," he said.

As per the 2011 census figures, around 41% of the 246.7 million households across India have no access to banking services. Around 46% of the 167.8 million rural households and 33% of the 78.9 million urban households have no access to banking facilities.

Speaking at the event, Jaitley said banks managed to open 1.5 crore bank accounts on the first day of the launch itself with the help of more than 70,000 camps opened across the country by banks.

The government also launched a facility through which mobile banking will be available on basic mobile phones.

A chairman and managing director of a state-run bank said that the challenge for banks will be to ensure that these accounts remain active.

“We should be able to open the bank accounts within the new deadline. But the challenge will be to ensure that the customers use these accounts even after the initial few months. This will happen only when the direct benefit transfer payments start flowing in," he said requesting anonymity.

Robin Roy, associate director at PricewaterhouseCoopers said these accounts are not high risk accounts and are actually a good credit risk if handled properly by banks.

“Banks should track these accounts—both their saving and credit pattern and the borrower closely. They should also try to build a credit record with the help of credit information bureaus. Microfinance has shown that the poor people are very good borrowers and make prompt repayments," he said. “These borrowers are used to borrowing at very high rates from money lenders. What banks should ensure is that the repayment is linked to the crop cycle."

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