Jan Dhan Yojana: Issues & challenges

Jan Dhan Yojana is quite clearly the nation’s biggest thrust towards getting this financial inclusion to the finish. Watch imminent panellists -- Geevarghese Vaidyan, Deputy Managing Director, State Bank of India, Shyam Srinivasan, MD & CEO, Federal Bank, GS Sandhu, Former Secretary, Financial Services, Sanjay Jaju, Former IT Secretary, Andhra Pradesh, Ram S Sangapure, Executive Director, Punjab National Bank and Arun Tiwari, CMD, Union Bank of India -- talk about issues and challenges government may face to implement Jan Dhan Yojana.

Below is the verbatim transcript of the discussion  

Latha: One of the biggest questions I have is that I have reported on maybe one and the half decades of financial inclusion. It is a theme that never goes out of fashion. However, a constant problem which Mr. Sandhu elaborated in great detail is that accounts don’t get used. In State Bank of India itself we had one of your previous managing directors telling us that for 3 crore accounts there were 9 crore transactions in one year. This means one account used probably thrice on an average probably two-thirds of them didn’t use it all and one-third of them probably transacted once or twice in two months. What is your sense? What can make those accounts useable; make it worth your while? Vaidyan: Let me also tell you that like you I have also been directly dealing with the financial inclusion. In fact when State Bank of India started the first biometric card in 2005 we went to Pithoragarh, we went to Warangal to see whether it will work or not. At that time our greatest challenge was there was no connectivity. Today when I go to the villages even in the remotest part of the country there is connectivity. I may not have connectivity in Mumbai but if I go to a village there is connectivity because all these things happen through technology. The second thing is that there was no viability earlier for the bank and there was no serious stake holder. Now what is happening is that there are so many stake holders because of the landmark announcement that has been made by our Prime Minister and our government. There are so many stake holders who are actually seeing this as an opportunity. I have had the benefit of working in three continents and I have not seen any of those places; I was in US, Africa and in India also. I have never seen this much of a landmark development that is happening for full financial inclusion. Q: Let me come down to numbers. We are all getting swayed by the moment as it were. It is what six weeks; in the last six weeks how many accounts did you all open? How many transactions happened in those accounts? Vaidyan: Some of the accounts are not getting used basically because the accounts are opened with zero balance. The accounts will start getting operated when money is coming in. So, what is the methodology for the monies to come? Our secretary was saying that there is benefit which is going to be transferred to these accounts. Right now what is happening is that these benefits which are going to the poor people are going through various channels. Q: So, only if direct benefit transfer comes you expect it to be used? Vaidyan: That will also be a driver; I am not saying that only if because there are so many other things connected. There is a RuPay cards, there is insurance. Q: What is your sense, in the past one year how many basic banking accounts did you open and how many got used? Srinivasan: We are getting to caught up on how many used and how many didn’t used. We have to look at this as a much longer term game. We have now in this programme 1,50,000 accounts that have been opened and balance of about Rs 100 crore has been built in. If this was not opened that Rs 100 crore may not have happened. So, there is a delta that has happened. Like you pointed out of that 3 crore -9 crore transactions, what is interesting is the rate of change that is happening.What is most likely, I do not have statistics to speak for the industry. If you take the 1,00,000 accounts across different points and time the first 1,00,000 may have build balances of Rs 10 crore in one year. The next 1,00,000 may have build Rs 20 crore in half a year. What is interesting is now 1,00,000 accounts have built a balance of Rs 96 crore in less than six weeks there is velocity happening. Having said that you expected me to be more candour, I will tell you both sides I don’t believe that we need to be in a tearing rush just because that we have to open an account and it is going to happen. India is not going to sing and dance just because we ask them to sing and dance. People will act to the manner that works best for them. What is happening is an ecosystem is being created, there is a sense of urgency that has come in and that urgency is activating people including our own branch people. However, I don’t believe it is going to happen on Monday morning everybody is going to bring all their money under their pillow into their bank accounts, and all bank coffers are going to, we are kidding ourselves. However Rs 4,000 crore coming is better than zero. Q: Mr. Sandhu RuPay cards since Mr Vaidyan spoke about RuPay cards. You spoke about 3.5 crore RuPay cards being issued along with each account holder. How many point-of-sale (PoS) destinations have you opened because what will the gentleman do with the RuPay card? Is every kirana shop or any kirana shop in the village going to accept the RuPay card. It is a very cash economy. Is that angle being tackled - the PoS angle? Sandhu: We have about 1 million PoS machines in the country and 160 thousand ATMs in the country and 1,15,000 bank braches. So, these three figures are very important. The issue is banks say that we don’t want to have more ATMs because there are no users, they are not viable. So, what should we have first - whether the card should come first or the ATM should come first? So, here we are providing the cards so that a demand is created for the ATMs and for the PoS machines because same is the story with PoS machines. The PoS machines if you find in the kirana shops but there are no users in the villages, in the small towns there is no one with the debit card or credit card. Q: Do you have a number for the PoS machines because it should go at least synchronous with - I mean if you issue 1 crore cards you should have at least probably 1 lakh PoS machines Sandhu: It will happen, there is a time lag. It can not happen overnight that we have 3 crore cards and automatically the next day we should have another 1 million. Q: That is not a government initiative you are hoping it will happen for banks? Sandhu: PoS is a private initiative we are encouraging them because that is a business for them also because they get transaction fee. However we will try to rope in this as a part of the scheme programme both the ATMs and the PoS machines to enable more of these taking place.