Guest post: the trials of banking the unbanked in India – beyondbrics - Blogs - FT.com

Guest post: the trials of banking the unbanked in India – beyondbrics - Blogs - FT.com:



"On 28th August, an ambitious programme on financial inclusion – Jan Dhan Yojana (People’s Wealth Scheme) – was rolled out across India amid much fanfare. The government claims that on the inaugural day, a record 15m zero-balance bank accounts were opened across the country under the program. Nowhere else in the world has such a large number of bank accounts been opened on a single day. This is undoubtedly a big achievement for the new government. 




The JDY should be viewed as financial inclusion 3.0 – as two major initiatives were launched previously with mixed results. The first initiative was launched in 1969 when 14 of the largest privately-owned banks were nationalized and the banking network was widened through brick-and-mortar branches. The second initiative was launched in 2005 with a greater emphasis on opening zero-balance bank accounts for poor Indians through the branchless business correspondent (BC) model. A BC is a representative of bank who provides doorstep banking services through the use of smart card handling devices which are connected to the main servers of the bank.



Like financial inclusion 2.0, the JDY also relies heavily on the cheaper BC model to deliver banking services in both rural and urban areas – allowing it to make inroads into unbanked locations. Close to 117m zero-balance accounts have been opened up by nearly 248,000 BCs as on March 31, 2014. These are pretty impressive numbers. But empirical evidence suggests that access to bank accounts has not translated into use. More than 80 per cent of zero-balance bank accounts opened by BCs are dormant."



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