Friday, September 19, 2014

Indian Bank Scheme: Pradhan Mantri Jan Dhan Yojana

The first we heard of Prime Minister Modi's new "banking scheme" was when our "all 'rounder" Harriet, asked for most of a day off to go to the bank an open an account. Bank accounts are something we take for granted in the US, since the minimum balances are so low that pretty much everyone (that wants one, at least) has one. This isn't the case in India, where minimum balances and monthly fees make bank accounts unobtainable for huge portions of the population. It's estimated that less than two thirds of Indian households have access to banking services. Harriet is a prime example; she makes much more working for us (probably twice) than she would performing a similar job for a local family, and she still couldn't (or wouldn't) afford a bank account. That's one of the reasons gold is so popular here, it's a way for people to store wealth.

Anyway, getting back on topic, the Prime Minister announced a plan to allow people to open bank accounts with zero minimum balance and much looser identification requirements. To encourage people to do so, he sweetened the pot with free accident insurance and life insurance. The new bank accounts will also allow for microloans after a set period of good standing. The goal of this scheme is to break the current dependence on usurers and ponzi schemes for loans and investments (respectively). It also may help reduce burgulary rates, by giving people an alternative to storing cash (or pawnable jewelry) in their houses.

The government has a lofty goal of 7.5 crore (or 75 million) new bank accounts by the end of the year. Numbers like that always put into perspective the amount of people in India... that's more than 20% of the population of the United States. Harriet left our house yesterday in time to get to the bank before it opened. Even so, she ended up waiting at the bank for 6 and a half hours to register for her account.

The Hindu Business Line Article
ZeeNews Article
Reuters Article
BBC Article

I can't help but notice that the American news companies either didn't notice, or didn't care to write about this topic. (And the comments on BBC and Reuters exemplify how most Westerners just have no concept of the impact something like a bank account can have for someone living on a few dollars per day.)

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