Modi to unveil comprehensive financial inclusion programme on Independence Day

The NDA government is set to unveil a comprehensive financial inclusion programme, incorporating insurance and pension cover, for those not served by the banking system, apart from opening of bank accounts, and even a default cover for lenders.

Prime Minister Narendra Modi will announce the comprehensive financial inclusion programme in his Independence Day address to the nation at the Red Fort.

The proposed comprehensive financial inclusion programme envisages opening of 150 million bank accounts for transfer of benefits, including pensions and other government funds to the poor. Of the new bank accounts, 120 million are in rural areas.

According to a note to the Indian Banks Association (IBA) from financial services secretary GS Sandhu, the new comprehensive financial inclusion programme focuses on households across rural and urban areas rather than focusing merely on rural poor – a major shift from the focus of the previous government. .

By removing the rural slant, the financial inclusion programme has been made more inclusive, says the ministry note.

Also, the present plan is proposed to be implemented as a 'mission mode' project. It envisages a comprehensive coverage of all excluded households by a six-pillar approach in two phases, according to the note.

The first phase of the programme, slated to begin on 15 August this year and end on 14 August 2015, will provide basic banking accounts with overdraft facility of Rs5,000 and RuPay debit card with inbuilt accident-insurance cover of Rs1 lakh and creation of credit guarantee fund for coverage of defaults in overdraft accounts, according to the ministry.

The second phase, which will begin on 13 August 2015 and conclude by 14 August 2018, will cover micro-insurance and unorganised sector pension schemes like Swavlamban.

The programme envisages connecting each and every household to a bank, while also ensuring that it is commmercially viable.

IBA said state-run banks, insurers and regulators are working to ensure a smooth start to the programme.

Under the banking facility, it is proposed to provide two savings bank accounts – one each to the husband and the wife.

Inclusive pension is also one of the pillars of the proposed comprehensive financial inclusion programme. Pension under 'the mission mode' will lay emphasis on this facility for the lower income segment and the unorganised workers.

The government proposes expand the scope of the National Pension Scheme (NPS) to serve the disadvantaged sections of the population through active involvement and participation of all categories of intermediary institutions like banks, NBFCs, MFIs, NGOs, corporates and annuity service providers.

It is also proposed to include micro-insurance in the second phase of the programme and insurers have already started working on it.

The premium for the low-cost insurance products, which is to be paid by the beneficiaries or from subsidy under the Rashtriya Swasthya Bima Yojana scheme, will range between Rs100 and Rs300 per annum, New India Assurance general manager K Sanath Kumar said.

Nabard will provide the initial Rs 1,000 crore to create a credit guarantee fund to cover possible defaults on overdraft accounts under the scheme, a Nabard official said.

The banking sector will have an additional 50,000 business correspondents (BCs), over 7,000 more branches and more than 20,000 new ATMs in the first phase, Sandhu told the IBA, adding that around 50,000 BCs are likely to be appointed in rural areas for the programme alone.