The Big of small shekels

Poverty could be a state of mind; it is no virtue; poverty of ideas is a curse. That’s a bit of sermonizing, given the poverty of politics. What else can explain the so-called ‘poor people’s purse’ — the sudden infusion of cash in zero-balance 25.68 crore Jan Dhan accounts? The total deposits in these accounts crossed Rs 70,000 crore and were at Rs 72,834.72 crore on November 23. On the day of demonetization on Nov 8-9, the deposits stood at Rs 45,636.61 crore. 

Feel like revising your idea of poverty in India? There are serious questions about what has been happening to the money, its linkage with the hidden wealth, the purpose of this money; and whether it would add to common prosperity. Or does it mean some worthless zeroes signifying more poverty of ideas?

Vijay C Roy in Chandigarh dissects Jan Dhan account concept and brings you the government’s vision of wealth, or the lack of it: 

Is attempt at financial inclusion successful? 

In 2011, the government launched Swabhimaan, mandating banks to open an outlet in each village with a population of over 2,000 by March 2012. In 2014, the Prime Minister announced his government’s flagship plan, the Jan Dhan Yojna, an improvisation over all such schemes. Of the total 25.68 crore accounts as on November 23, nearly 23% of them have zero balance. The number of credit-linked account holders is very small. That means very low availability of loans for such individuals

For instance, Kish Kumari (28), a mother of two children, opened a Jan Dhan account in Chandigarh on April 2015 with an opening balance of Rs 5,000. She works as a domestic help while her husband is a daily wager. “When I opened my account, the bank told me that I would get credit and insurance facilities. But I have not got anything,” she says. 

The banks have their own version. They say that on an average a skilled daily wager get Rs 600 per day and unskilled Rs 400. “The credit extended to Jan Dhan account holder is Rs 5,000 with many conditions,” said a senior banker. Dr Rajiv Khosla, Head, University School of Business, Chandigarh University, Punjab, says the repackaged version of ‘no frills’ bank accounts has hit the high-expectation domain. “The haste with which these accounts were opened brutally destroyed the sanctity of the objective.” A survey by consulting firm MicroSave revealed that the government pressure to open accounts in a limited time resulted in several secondary account being opened. “A third of the accounts opened by banks was not fresh. The customers who already had a bank account were forced to open another account,” it said. MicroSave is an international financial inclusion consulting firm with offices across Asia, including India, and Africa.

Is banking correspondent or Bank Mitra model successful?

The two schemes aim at enhancing banking facilities in rural areas. The Jan Dhan Yojna portal says 1,27,199 bank mitras are to be appointed. The target is not way off the mark. But what is worrying is inadequate commission, poor support from banks, high investment on point-of-sale (POS) machines and the lack of business potential. Initially bank mitras received incentives for signing up people, but as saturation sets in, they have to make money out of the transactions. That means the money isn’t in circulation yet, although things may change when Aadhaar-based subsidy transfers start rolling out. So, there is a big if.

Very high zero balance accounts

Rough estimates suggest that about one-third of the people under Jan Dhan have a secondary account. Financial experts and researchers say the duplication can be attributed to the target-based account opening approach by banks or banking correspondents as they receive incentives. For instance, Ram Lal, a tea vendor, said: “I had a saving bank account but I was told that I would get subsidy and benefits like overdraft (credit) facility of Rs. 5,000, so I opened another account.” 

Are RuPay cards serving the purpose?

Many say people in villages find using a RuPay card that comes with an identification pin too cumbersome. Currently, the number of biometric ATMs is too less, which is also a stumbling block. Lokesh Singh, senior manager (Government2People), MicroSave said: “People in rural areas are reluctant to use the Rupay card, because most of them are illiterate.” Of the 25. 67 crore account holders, RuPay cards have been issued to 19.52 crore account holders. Also, many such cards are not activated because of reluctance in using the card for cash withdrawal or shopping. 

Do banks have the required infrastructure to sustain the accounts?

According to the PMJDY data, public sector banks opened 20.51 crore accounts (in rural area: 11.44 crore, urban: 9.07 crore), while regional banks numbered 4.41 crore and private sector banks 86 lakh. An average cost of opening an account is Rs 200. So, there are recurring expenses attached to each account. Lokesh Singh of MicroSave says there is a need to educate the people to use the accounts more frequently for deposit and withdrawal so that banking becomes a business proposition rather than only a social obligation.

Net connectivity in villages and expectations

It has turned out to be the biggest challenge. “Bank Mitras continue to face internet issues,” says a Punjab National Bank official. The result is rural customers have to travel to a tehsil or village headquarters for minor transactions. Bank officials’ hope rests on cellular operators improving internet connectivity. 

The beneficiaries get RuPay debit cards which come with an accident insurance cover of Rs 1 lakh. Activation of RuPay debit card is necessary to get an insurance claim. Considering this and other features, it appears to be a great plan. Rajiv Khosla of Chandigarh University differs. “Under the prevailing circumstances, the gigantic financial inclusion scheme cannot be seen more than a corridor through which accumulated savings of the poor are routed to the rich sections. In case of financial emergencies, the same money is parked by the rich into these schemes”, he said. “Had the governments been really sensitive towards the poor, it would have made efforts to provide more jobs to the poor. Such schemes take time, cost and a huge bureaucratic effort.” 

So, is it over to the bureaucracy? The political cost will tell in due course of time.