MONEY FOR NOTHING
Narendra Modi wants India’s poorest to get bank accounts — even if they’re broke,
Raj Kumar Sharma, a milk seller with just one cow, used to think bank accounts were “only for important people.” That changed when he heard a pitchman in the village lane beating a drum and touting an easy new way to sign up for an account.
“Your account can make your destiny,” the drummer announced.
Soon, Sharma had signed up for his first-ever account at a camp run by the State Bank of India in this rural northern village, part of an ambitious government exercise to bring nearly 600 million Indians into the formal banking system by January.
Launched by Prime Minister Narendra Modi, the program aims to include the poorest and the most marginalized in India’s economic growth and reverse a recent slide in household savings.
Thousands of bankers and banking agents have fanned out across the country to reach people in far-flung villages and city slums. To open an account, reams of identity documents are no longer needed — and money for a deposit isn’t necessary, either.
It is uncertain whether the new accounts will remain active, because India lacks the network to provide service to so many people, analysts say. Even so, more than 55 million accounts have been opened since August, with $750 million (U.S.) in deposits.
“There are a lot of cash-based transactions in India. We want to bring it into the banking system so that the cash becomes productive, the poor get into the habit of small savings and get access to credit,” said Gurdial Singh Sandhu, a secretary in the Ministry of Finance in New Delhi.
According to the World Bank, only 35 per cent of India’s 1.2 billion people have bank accounts; the government says the figure is close to 58 per cent. About 73 per cent of farming families in rural areas have no access to formal sources of credit, according to a 2013 report by the Reserve Bank of India.
In the past 15 years, the microfinance industry expanded to bridge the gap, but the sector gained a bad reputation in recent years because of some agents’ aggressive loan collection practices.
In an email to bank officers in August, Modi called the account-opening drive “a national priority.”
The new accounts come with a debit card, an accident insurance policy worth about $1,600 and a shortterm loan of about $100 after a year.
Modi’s banking push is not India’s first. Past efforts fizzled because the government did not monitor them, and new accounts remained dormant, Sandhu said. But the freebies, Modi’s personal interest and the target of reaching every home are likely to make this campaign more effective, he added.
As for Sharma, the milk seller, he said he sees hope — and an opportunity to expand his business.
“If I can get a loan with dignity from a bank, I will buy another cow.”
Rama Lakshmi is a reporter for the Washington Post.