Social security and fincial inclusion

By launching three ambitious social security schemes, Prime Minister rendra Modi’s dream of fincial inclusion of the poor has entered its second phase. Bringing the poor under banking cover through the Pradhan Mantri Jan Dhan Yoja (PMJDY) was the first phase, with 15 crore bank accounts opened since August 15 last year pooling deposits of Rs 15,800 crore. Claiming that most of the poor now have proper banking cover, the Prime Minister believes the time is ripe to roll out social security measures which can cover 80 per cent of the country’s population of 125 crores. As part of this gargantuan exercise, one pension scheme and two insurance schemes were launched on Saturday. With the last NSSO survey estimating that 88 per cent of the total labour force do not have any formal pension cover, the Atal Pension Yoja will focus on this unorganised sector. After contributing for twenty years or more to this scheme, subscribers will get a fixed minimum pension of Rs 1,000, Rs 2,000, Rs 3,000, Rs 4,000 or Rs 5,000 per month, starting at the age of 60 years, depending on the contribution option exercised on entering the scheme at age between 18 and 40 years. The life insurance scheme Pradhan Mantri Jeevan Jyoti Bima Yoja (PMJJBY) will offer a cover of Rs 2 lakh to all savings bank account holders in the age group of 18-50 years, covering death due to any reason, for a premium of Rs 330 to be paid every year. The other insurance scheme Pradhan Mantri Suraksha Bima Yoja (PMSBY) provides accidental death-cum-disability cover of Rs 2 lakh to all savings bank account holders in the age group of 18-70 years for a premium of Rs 12 per year. The basic premise of these three social security schemes is to get the poor to begin using their accounts and adopt banking practices. This is expected to reduce the number of zero balance bank accounts created under the Jan Dhan scheme.

Banking for the poor is a part of the ‘direct benefit transfer’ (DBT) concept that needs to be implemented. This alone can guarantee the effectiveness of various welfare schemes the Central and state governments are undertaking, as well as the subsidies they are making available under different headings. The government has to think on a truly big scale and act accordingly, so as to help the poor bridge the ‘digital divide’, bring about complete literacy and make possible inclusive, all-round development. The rendra Modi government is therefore pushing for the Aadhaar card for all residents of the country, a bank account for every household, transfer of subsidies and welfare scheme funds directly to the accounts of targeted households, as well as insurance and pension benefits tied to these accounts. Obviously a degree of digital literacy will be a pre-requisite to operate bank accounts, avail of schemes and subsidies, as well as effectively use Aadhaar, ATM, PAN and various other smart cards. Hitherto the stark socio-economic reality in vast stretches of rural India and urban slums made poor households regard literacy a luxury they could ill-afford in their struggle to survive. But if conditions are so created that ‘literacy with a digital component’ becomes necessary to avail of benefits, will this incentive push crores of poor Indians to jump over the digital divide and move on the road to development? This is what the rendra Modi government is daring to dream. And it is for all state governments to participate in making this dream a reality. If information technology and software skills made India a country to be reckoned with by the beginning of the 21st century, surely it ought to be harnessed now to include its vast, toiling population in the developmental loop.

Along with fincial inclusion therefore, the government has to push innovative teaching and training programmes for imparting digital skills. As of 2014, though less than 20 per cent people in India were using the Internet, three out of every four Indian had a mobile phone. The Prime Minister now envisions a digital India with 60 crore broadband connections and 100 per cent rural tele-density, so as to bring about access to information without barriers by 2020. If government policy makes mobile internet affordable and ubiquitous in the near future — e-governce, e-commerce and other services will become meaningful for vast sections of people in the country. Getting the poor and underprivileged into banks was hitherto considered a near-hopeless task as they had no money to save, leave alone contribute towards insurance or pension. But if the government puts money into their accounts and encourages them to save as well as contribute, it will surely herald a new age. And let us not think that the poor cannot use banking facilities to improve their lot. Nobel Peace laureate Mohammad Yunus in neighbouring Bangladesh showed the enormous potential of micro-fince to the entire world, almost single-handedly bringing poor people under cover with 96 per cent of its borrowers being women. Using the sense of responsibility of women borrowers and the discipline of borrower groups in maintaining clean records, Yunus’ Grameen Bank has set a shining example. Once the appropriate banking laws and regulatory body for microfince is put in place in India, and banks change their perspective and practices accordingly — fincial inclusion of the poor may become a reality sooner than we think.