News / Economy

Modi to Launch Plan for Every Indian Household to Have Bank Account

FILE - An Indian woman buys vegetables at a road side stall  in New Delhi, Aug. 20, 2014.
FILE - An Indian woman buys vegetables at a road side stall in New Delhi, Aug. 20, 2014.

Prime Minister Narendra Modi will promise on Thursday to provide a bank account for every Indian household when he launches a major initiative that could save billions of dollars in welfare spending and help mend strained state finances.

India has grown to become Asia's third largest economy, but nearly two-fifths of its 1.27 billion people do not have a bank account. This leaves them dependent on moneylenders and other informal financing routes.

In a keynote speech this month, Modi made financial "inclusion" a top priority of his administration. He followed this up by writing 725,000 emails to bank officials urging them to support the initiative.

“There is an urgency to this exercise as all other development activities are hindered by this single disability,” he said in a Twitter post.

India's Prime Minister Narendra Modi takes his oath at the presidential palace in New Delhi May 26, 2014India's Prime Minister Narendra Modi takes his oath at the presidential palace in New Delhi May 26, 2014
India's Prime Minister Narendra Modi takes his oath at the presidential palace in New Delhi May 26, 2014
India's Prime Minister Narendra Modi takes his oath at the presidential palace in New Delhi May 26, 2014

Modi won India's biggest electoral mandate in 30 years in May with a promise to revive India's flagging economy. So far, he is yet to launch the big-bang reforms needed to break out of a cycle of low growth and high inflation.

Some commentators say his emphasis on the new banking and insurance program seeks to cement his support base among poor households with small savings. Over 40 percent of Indians live on less than one dollar a day.

The launch of the Jan Dhan Yojana, or the Scheme for People's Wealth, comes weeks after Modi blocked a global trade deal, saying it threatened the interests of poor farmers.

Under the banking scheme, account holders would get a debit card and accident insurance cover of up to 100,000 rupees ($1,654). They would also get an overdraft facility of up to 5,000 Indian rupees.

Benefits and challenges

By paying benefits directly into bank accounts, the scheme would seek to cut waste and corruption that inflate India's $43 billion subsidy bill, equivalent to more than 2 percent of its GDP, for handouts of grain, fuel and fertilizer.

The push for greater financial inclusion would also diminish the influence of money lenders and other informal financing channels who operate outside the ambit of the Reserve Bank of India (RBI), blunting its monetary policy tools.

While the drive for universal banking access is not new, the failure to provide services tailored for the poor and low-income groups has kept India way off its goal.

For example, many borrowers in the “unbanked” segment such as small-time traders need overnight loans of $25-30 that are not offered by commercial banks, making them turn to informal financing channels.

Puneet Chopra, associate director at a financial inclusion consulting firm MicroSave, said such a handicap could also trip up Modi's project.

“Without addressing the specific needs of the segment you are targeting, you cannot hope to have much success,” he said.

Modi's plan to provide an overdraft facility could also end up swelling bad loans at Indian banks as it does not spell out how the banks can collect debts.

“If there is no mechanism on the ground to collect repayments or to service the accounts, these are likely to turn dormant as soon as the overdraft is disbursed,” Chopra said.

“There is a high risk that the scheme leads to a massive dole-out of subsidies instead of assisting the targeted distribution of benefits,” he said.

Bad loans at Indian banks rose to 4.1 percent of gross advances in March from 2.4 percent in March three years ago, the RBI said in its annual report last week. Restructured loans, meanwhile, rose to 5.9 percent of gross advances in March from 2.5 percent in June 2011.

You May Like

Video Americans, Tourists, Reflect on Meaning of Thanksgiving

VOA garnered opinions from several people soon after November 13 Paris attacks, which colored many of their thoughts

Video Thais Send Security Concerns Down the River

In northern Thailand, the annual tradition of constructing floating baskets to carry away the year’s bad spirits highlights the Loy Krathong festival

Video Tree Houses - A Branch of American Dream

Workshops aimed at teaching people how to build tree houses have become widely popular in America in recent years

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Belgium-Germany Border Remains Porous, Even As Manhunt For Paris Attacker Continuesi
Ayesha Tanzeem
November 25, 2015 10:46 PM
One of the suspected gunmen in the Nov. 13 Paris attacks, Salah Abdeslam, evaded law enforcement, made his way to Belgium, and is now believed to have fled to Germany. VOA correspondent Ayesha Tanzeem makes the journey across the border from Belgium into Germany to see how porous the borders really are.

Video Belgium-Germany Border Remains Porous, Even As Manhunt For Paris Attacker Continues

One of the suspected gunmen in the Nov. 13 Paris attacks, Salah Abdeslam, evaded law enforcement, made his way to Belgium, and is now believed to have fled to Germany. VOA correspondent Ayesha Tanzeem makes the journey across the border from Belgium into Germany to see how porous the borders really are.

Video Islamic State Unfazed by Losses in Iraq, Syria

Progress in the U.S.-led effort to beat Islamic State on its home turf in Iraq and Syria has led some to speculate the terror group may be growing desperate. But counterterror officials say that is not the case, and warn the recent spate of terror attacks is merely part of the group’s evolution. VOA National Security correspondent Jeff Seldin has more.

Video Taiwan Looks for Role in South China Sea Dispute

The Taiwanese government is one of several that claims territory in the hotly contested South China Sea, but Taipei has long been sidelined in the dispute, overshadowed by China. Now, as the Philippines challenges Beijing’s claims in an international court at The Hague, Taipei is looking to publicly assert its claims. VOA’s Bill Ide has more from Beijing.

Video Syrian Refugees in US Express Concern for Those Left Behind

Syrian immigrants in the United States are concerned about the negative tide of public opinion and the politicians who want to block a U.S. plan to accept 10,000 Syrian refugees. Zlatica Hoke reports many Americans are fighting to dispel suspicions linking refugees to terrorists.

Video After Paris Attacks, France Steps Up Fight Against IS

The November 13 Paris attacks have drawn increased attention to Syria, where many of the suspected perpetrators are said to have received training. French President Francois Hollande is working to build a broad international coalition to defeat Islamic State in Syria and in Iraq. Zlatica Hoke reports.

Video US, Cambodian Navies Pair Up in Gulf of Thailand

The U.S. Navy has deployed one of its newest and most advanced ships to Cambodia to conduct joint training drills in the Gulf of Thailand. Riding hull-to-hull with Cambodian ships, the seamen of the USS Fort Worth are executing joint-training drills that will help build relations in Southeast Asia. David Boyle reports for VOA from Preah Sihanouk province.

Video Americans Sharpen Focus on Terrorism

Washington will be quieter than usual this week due to the Thanksgiving holiday, even as Americans across the nation register heightened concerns over possible terrorist threats. VOA’s Michael Bowman reports new polling data from ABC News and the Washington Post newspaper show an electorate increasingly focused on security issues after the deadly Islamic State attacks in Paris.

Video World Leaders Head to Paris for Climate Deal

Heads of state from nearly 80 countries are heading to Paris (November 30-December 11) to craft a global climate change agreement. The new accord will replace the Kyoto Protocol on Climate Change that expired in 2012.

Video Uncertain Future for Syrian Refugee Resettlement in Illinois

For the trickle of Syrian refugees finding new homes in the Midwest city of Chicago, the call to end resettlement in many U.S. states is adding another dimension to their long journey fleeing war. Organizations working to help them integrate say the backlash since the Paris attacks is both harming and helping their efforts to provide refugees sanctuary. VOA's Kane Farabaugh reports.

Video Creating Physical Virtual Reality With Tiny Drones

As many computer gamers know, virtual reality is a three-dimensional picture, projected inside special googles. It can fool your brain into thinking the computer world is the real world. But If you try to touch it, it’s not there. Now Canadian researchers say it may be possible to create a physical virtual reality using tiny drones. VOA’s George Putic reports.

Video New American Indian Village Takes Visitors Back in Time

There is precious little opportunity to experience what life was like in the United States before its colonization by European settlers. Now, an American Indian village built in a park outside Washington is taking visitors back in time to experience the way of life of America's indigenous people. Carol Pearson narrates this report from VOA's June Soh.

Video Even With Hometown Liberated, Yazidi Refugees Fear Return

While the northern Iraqi town of Sinjar has been liberated from Islamic State forces, it's not clear whether Yazidi residents who fled the militants will now return home. VOA’s Mahmut Bozarslan talked with Yazidis, a religious and ethnic minority, at a Turkish refugee camp in Diyarbakır. Robert Raffaele narrates his report.

Video Nairobi Tailors Make Pope Francis’ Vestments

To ensure the pope is properly attired during his visit, the Kenya Conference of Catholic Bishops asked the Dolly Craft Sewing Project in the Nairobi slum of Kangemi to make the pope's vestments, the garments he will wear during the various ceremonies. Jill Craig reports.

Video Cross-Border Terrorism Puts Europe’s Passport-Free Travel in Doubt

The fallout from the Islamic State terror attacks in Paris has put the future of Europe’s passport-free travel area, known as the "Schengen Zone," in doubt. Several of the perpetrators were known to intelligence agencies, but were not intercepted. Henry Ridgwell reports from London European ministers are to hold an emergency meeting Friday in Brussels to look at ways of improving security.

Video El Niño Brings Unexpected Fish From Mexico to California

Fish in an unexpected spectrum of sizes, shapes and colors are moving north, through El Niño's warm currents from Mexican waters to the Pacific Ocean off California’s coast. El Nino is the periodic warming of the eastern and central Pacific Ocean. As Faiza Elmasry tells us, this phenomenon thrills scientists and gives anglers the chance of a once-in-a-lifetime big catch. Faith Lapidus narrates.

Video Terrorism in Many Forms Continues to Plague Africa

While the world's attention is on Paris in the wake of Friday night's deadly attacks, terrorism from various sides remains a looming threat in many African countries. Nigerian cities have been targeted this week by attacks many believe were staged by the violent Islamist group Boko Haram. In addition, residents in many regions are forced to flee their homes as they are terrorized by armed militias. Zlatica Hoke reports.

Video Study: Underage Marriage Rate Higher for Females in Pakistan

While attitudes about the societal role of females in Pakistan are evolving, research by child advocacy group Plan International suggests that underage marriage of girls remains a particularly big issue in the country. VOA’s Ayesha Tanzeem reports how such marriages leads to further social problems.

VOA Blogs

World Currencies


Rates may not be current.