State-run banks are examining the feasibility of reactivating some inoperative Jan Dhan accounts so that these bank accounts can receive money under the recently announced government cash transfer scheme to economically weaker sections of the society.
This plan was announced last week by the government under the novel coronavirus, or COVID-19, economic relief package. There is no official communication so far, but banks have been asked to look at its feasibility at the branch level, sources in the know told Moneycontrol.
On March 24, Finance Minister, Nirmala Sitharaman announced a slew of relief measures including direct cash transfers to the economically poorer sections. As per this, women Jan Dhan account holders will receive Rs 500 per month for three months to meet household expenditure. Besides, Sitharaman announced cash transfers to farmers, Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) beneficiaries, poor widowers and pensioners.
“Branch managers of public sector banks are looking at this. If they are convinced that these accounts are KYC complaint and are inoperative due to mere cash flow issues, they can reactivate these accounts to receive cash transfers announced by the government,” a senior official from National Bank for Agriculture and Rural Development (NABARD) said.
According to latest data available on the Jan Dhan Yojana website, there are 38.28 crore beneficiary accounts, which hold a total balance of Rs 1,18,105.97 crore. As of January 15, less than 19 percent of these accounts were inoperative. This ratio has come down significantly over the years. In March 2017, about 40 percent of these accounts were inoperative.
“Most Jan Dhan accounts are inoperative due to lack of cash flows. These accounts are thus marked inoperative by the banks. Hence, with the prospects of getting some cash flows in, banks should have no issues in reactivating them,” said a senior banker.
Under normal circumstances, if there is no transaction in an account for, say, six months to one year, banks freeze such accounts and reactivate them only with fresh documentation, KYC, etc. But, in this case, banks are likely to initiate the process themselves.
Sitharaman, last week, announced a Rs 1.7 lakh crore welfare package to mitigate the economic damage caused by the coronavirus-led 21-day lockdown. As per the plan, daily wages under MGNREGA have been increased from Rs 182 to Rs 202.
Farmers under the PM Kisan Yojana scheme would receive Rs 2,000 in the first week of April. The move would benefit 8.69 crore farmers. That apart, the government also intends to provide Rs 1,000 to senior citizens, widows and physically handicapped.
The 21-day lockdown is expected to severely impact the livelihoods of rural population, especially migrant workers. According to various research reports, economic activity is likely to shrink significantly as the COVID-19 lockdown takes a toll on the economy. CARE Ratings expects the economic growth to slow to 1.25-2.5 percent in Q4 FY20.
“With the virus now affecting and disrupting global supply chains and the economy for almost three months now, the situation is having a severe implication on the Indian economy as well. This is because India is dependent on global markets for exports and imports, which has the potential to hit the Indian companies and, in turn, economy,” CARE said in a March 30 note.