With cash flowing in, the scheme looks viable
With 12.7 crore bank accounts already opened, the prime minister’s flagship financial inclusion programme, is ready to take off. The government has got a Guinness Book of World Records plaque for the number of accounts, but the scheme’s real worth lies in it being viable, and that is beginning to happen. For one, while the number of bank accounts has risen by 2.2 crore between January 1 and February 4—the total balance in the 12.7 crore accounts is now R10,713 crore—the proportion of zero-balance accounts is beginning to come down. On January 1, over 73% of the accounts fell in this category. By February 4, while the number of such accounts had risen by 80 lakh, they formed 67% of the total accounts. This suggests that money has begun to flow into these accounts. According to government data, by January 31, over R3,600 crore had already been transferred through the PaHaL direct benefit transfer programme for LPG in 54 districts—by April 1, the entire LPG base is to be covered by PaHaL.
In addition, around R33,000 crore is to be given for the MGNREGA through Jan Dhan—a beginning has been made in 300 districts which have around 4 crore beneficiaries. Once the government accepts the recommendations of the High Level Committee on restructuring FCI and starts substituting the FCI-based procurement system with direct cash transfers, Jan Dhan will truly take off. Right now, the food subsidy amounts to R1.15 lakh crore, as per budget estimates for FY15, and the fertiliser subsidy, to R72,970 crore—the government is likely to move to cash transfers for that as well. Though the commission structure for such payments has not yet been frozen, just the LPG, food, fertiliser and MGNREGA funds add up to a transfer of R2.4 lakh crore in FY14. A 2% commission on each payment would add up to R4,800 crore. It is not surprising therefore that India’s top telcos and industrial houses are lining up to set up payments banks—along with internal transfers within the country, government payments (including those by state governments) make for good business. For the political class, it is a win-win since, once Jan Dhan bank accounts have cash flowing through them, banks will feel confident about giving overdraft facilities to even the poor—that’s a lot of votes to be garnered.