For want of balances in a large number of accounts opened under the government’s Jan Dhan scheme, banks are unable to extend overdraft facilities to account holders as not more than 30% have become eligible for this facility.
Data from the government show that 43% of the total accounts opened under the scheme still do not have any balance. The country’s largest bank, State Bank of India, has given overdraft facility to about 49,000 account holders till date, out of the total 4 crore it opened under the Jan Dhan scheme.
B Sriram, managing director for national banking at SBI, said that banks have eligibility criteria that borrowers have to meet and also accounts have to show healthy balances for the overdraft to be given. The overdraft debit outstanding is just R7.8 crore, a drop in the ocean of R2,800-crore balances lying in these accounts.
“Overdraft is picking up, but I won’t say it is substantial today because we have a set of criteria to meet. The number of people who have been eligible for overdraft is about 20-30% and, out of that, only 4-5% have actually availed of this benefit,” said SKV Srinivasan, executive director, IDBI Bank. The public sector lender has opened about 9.9 lakh accounts under the Jan Dhan scheme, which have balances of about R50-60 crore.
While some lenders, such as SBI, IDBI Bank and Union Bank of India, have been able to garner healthy balances, this success eludes many others. For lenders, such as Bank of Baroda, Canara Bank and Bank of India, not even half the number of accounts opened have garnered any balance. The ratio dwindles for smaller banks such as Andhra Bank, UCO Bank and United Bank of India
Nevertheless, bankers said that balances are building up at a healthy pace and, amid calls for compensation from the government towards banks’ efforts under the Jan Dhan Yojana scheme, they are positive that these accounts will achieve at least operating break-even in the next one year. “These balances are growing very healthily and not just triggered by subsidy transfers. We see operative break for Jan Dhan accounts this year. If we achieve the target for this year, operating breakeven can be achieved,” said SBI’s Sriram.
Data from the government shows that out of the 18.18 crore accounts opened by banks until September 9 (Jan Dhan was launched in August 2014), about 43% have no balance. The remaining 7.4 crore accounts have racked up total balance of Rs 23,699 crore. SBI has opened about 4crore accounts, out of which around 2.5 crore accounts have currently balances totaling Rs 2,800 crore.
Srinivasan of IDBI Bank said that besides the government’s direct benefit transfers, insurance schemes, both life and general, are contributing to transaction volume in the Jan Dhan accounts.
“The insurance schemes are contributing to the transactions as people pay premium and these schemes, at least in life insurance, are also doing good,” said Srinivasan. The Jan Dhan scheme was launched in August 2014 and, thereafter, the government launched insurance schemes such as the Jeevan Joyti Bima Yojana and Suraksha Bima in May this year.