"We want to integrate the poorest of the poor with bank accounts with Pradhan Mantri Jan Dhan Yojana," he said in his maiden Independence Day address to the nation.
Modi said it is essential to provide banking services to the poor people, especially farmers, to save them from the clutches of moneylenders.
"Why are farmers committing suicide They take loan from money lenders, cannot repay money and commit suicide. For daughter's marriage, they take loans from moneylenders, then their life is full of miseries. Who will protect those poor families," he questioned.
Observing that people have mobile phones but not bank accounts, Modi said, the scheme will help in bringing the benefits of formal banking system to them.
"Today there are crores of families which have mobile phones but no bank accounts. We have to change this. The economic development must benefit poor and it should start from here," he said.
Under the Jan Dhan Yojana, he said, "the person who will open bank account will get a debit card and the family will get Rs 1 lakh insurance cover. This will help the family to tide over the unforeseen eventuality."
About two-fifths of Indians lack a bank account.
Commenting on the announcement, CII Director General Chandrajit Banerjee said "this will bring in more people into the formal banking channels".
The Union Cabinet has already cleared the two-phase financial inclusion scheme under which bank accounts will be opened for 15 crore poor persons with an overdraft facility of Rs 5,000 and accident insurance of Rs 1 lakh.
The scheme, to be pushed by the government in a mission mode, seeks to provide two accounts to 7.5 crore identified households by August 2018.
The main features of the scheme include Rs 5,000 overdraft facility for Aadhar-linked accounts, Ru Pay Debit Card with inbuilt Rs 1 lakh accident insurance cover and minimum monthly renumeration of Rs 5,000 to business correspondents who will provide the last link between the account holders and the bank.