IFAs expect that Jan Dhan Yojana will provide a fillip to micro SIPs in mutual funds.
In order to increase financial inclusion, Prime Minister Narendra Modi has recently launched a scheme called ‘Jan Dhan Yojana’ aiming to provide basic banking services to the underprivileged.
The scheme is essentially for the unbanked population. An official from a private bank who is appointed to carry out account opening activity under this scheme clarified that those underprivileged people already having a bank account are not be eligible to open such accounts.
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Key features of Jan Dhan Yojana:
Zero balance bank account for underprivileged Overdraft facility up to Rs.5000 after six months of active transaction ATM card with no annual charge Personal accidental death insurance of Rs.1lakh Life insurance cover of Rs.30,000 on accounts opened before January 26.
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The account holders under this scheme will get benefits like accidental insurance cover of Rs. 1 lakh and life insurance cover of Rs. 30,000. Many senior officials of insurance companies whom Cafemutual spoke have roughly estimated annual premiums of Rs. 25 for accidental insurance and Rs.80 to Rs.100 for the life insurance cover under this scheme.
Apart from this, the policyholders will get an overdraft facility of up to Rs. 5000. A senior bank official told Cafemutual that banks may charge a nominal rate of interest against such loan along with easy EMI facility. A few experts are skeptical about providing such loans to poor since they believe it can balloon bad debts. However, a Press Information Bureau note says that the government will create a credit guarantee fund for coverage of defaults in overdraft accounts in the second phase of this scheme.
Besides, the account holders will get ATM card and basic mobile banking facility.
Media report says that the scheme has received tremendous response from people. A record 1.5 crore bank accounts were opened across the country on the inaugural day of scheme. In his speech on the launch of the scheme, PM Modi said that the scheme will cover 7.5 crore people by January 26.
The rationale
Media report suggests that half of Indian households don’t have any formal access to banking services. Hence, such a move can play vital role to reach out to rural India and give them access to banking and credit facilities.
How does it help IFAs?
This scheme can create a big difference for IFAs practicing in small cities and towns. Vizag based Tirupati Rao believes that this scheme will boost MF industry through micro SIP. “Though chances of investment in mutual fund through lumpsum is negligible, people may like to put a small amount through micro SIP of Rs.500,” he said.
Rajendra Prasad Verma of Purnea, a small town in Bihar, is of the view that this scheme will help IFAs in creating awareness about mutual fund in a rural areas.
In the second phase, the government will promote micro insurance and pension schemes through this scheme, says the PIB note.
