“If we want to eliminate poverty, we need to connect all the people to the financial system”, said Modi, Prime Minister of India. His goal, that all families -urban as well as rural- have access to financial services, is being reached quickly. In just a few months, about 103 million savings accounts have been opened within the framework of this initiative.
Economically disadvantaged sectors can now open an account without depositing a single rupee and access services such credit card accounts to apply for loans, insurance and pensions, in addition to performing regular banking operations. The government will deposit funds from cash benefits programs in their accounts, such as student scholarships. As an incentive, those who open an account under this program get free accident and life insurance.
The goal is for citizens to change the habit of keeping their savings ‘under the mattress’ and deposit them in banks instead. Analysts who support the project say that people with limited financial means often rely on loan sharks who often charge up to five times more interest than banks. They also stress that banking will ensure that the money allocated to them by the government doesn’t get ’lost’ on the way. However, critics point out that the previous government launched a similar campaign in 2011, which failed because most people didn’t use the accounts and the banks lost interest.
Many new users don’t know what banks or accounts are for, but the Modi government will ensure that financial education is given and that his program will focus on families, not villages. He adds that every village will have a bank no farther than five miles away, and accounts will be accessed from cell phones. This large-scale initiative may benefit social groups who are severely financially disadvantaged, and whose access to banking is much lower than the world average.
Source: elpais.com
