One Year of Modi

“Financial Inclusion” Modi Style: Bank accounts, insurance policies – but no money


Prime Minister Modi and his government have been tom-tomming their commitment to Sab ka Vikas (everybody’s development) and one of the major policies through which they think ‘development’ will take place is “financial inclusion”. This does not mean empowering people by ensuring decent work for them or enhancing their incomes. For Modi and his followers, this means opening bank accounts and getting people insured. This is very convenient because it mobilises the paltry savings of crores of Indians and puts them in the hands of big corporates for making even more money – for themselves. And, it creates the illusion of ‘sab ka vikas’. In a country where average monthly consumer expenditure of a family of five is about Rs.7000 in rural areas and Rs.13,000 in urban areas according to the latest NSSO report, and where an agricultural worker earns about Rs.6000 per month for only 6 months in a year or a woman earns just Rs.5000 per month sowing and transplanting for four months a year (Labour Bureau Wage Survey March 2015) it is a cruel joke to ask them to save money, take insurance policies and use the mobile phone to transact funds.

Putting aside for a moment the sheer callousness of this fraudulent “financial inclusion” of Modi Sarkar, let us look at what his government has to offer in the name of recently announced insurance and pension schemes, linked to the as yet zero-balance accounts opened under the Jan Dhan Yojana.

The Prime Minister announced three social security schemes on 9th May 2015 with much fanfare. These schemes are Atal Pension Yojana (APY), PM Jeevan Jyothi Yojana (PMJJY) and PM Suraksha Bima Yojana (PMSBY).  The Finance Minister in his Budget speech earlier had announced these schemes as a great social security measure. The Budget makes some provision for Atal Pension Yojana but there is no budgetary support for the other two schemes. The Secretary of Department of Financial Services has made it clear that for PMJJY and PMSBY there is no government subsidy.

These three schemes are said to be a part of the grand vision of the Prime Minister for financial inclusion. The salient features of the schemes are as follows:

PMJJBY – Any Savings Bank Account holder between ages 18-50 years can join this scheme by paying an annual premium of Rs.330.  The life insurance coverage is Rs 2 lakh.  This is a term assurance and renewable every year.  There is no maturity benefit involved here. According to our information insurance companies are not comfortable with the pricing of the scheme. Therefore, the pricing will change for the next year depending upon the actual claim experience. Any loss due to pricing will have to be borne by the insurance company.

PMSBM – Any Savings Bank Account holder between ages 18-70 can join this scheme by paying a premium of Rs.12 per annum.  The insurance coverage is Rs. 2 lakhs for accidental death or full disability and Rs.1 lakh for partial disability.  The pricing appears low and may change next year depending upon the actual claim experience.  Here again any loss due to pricing has to be borne by the insurance company.

Both these schemes cannot be called universal as they restrict the coverage only to the savings bank account holders. Also, there is no subsidy involved and therefore these schemes cannot be claimed as government-run social security schemes.

It is a known fact that more than 50 percent of the Indians do not have a bank account.  According to the RBI, there are 684 million SB Accounts for a population of 1.25 billion.  Moreover 684 million bank accounts do not mean 684 million persons holding the accounts as one person can hold multiple bank accounts. Hence the coverage is restricted to only one account.  Secondly, there is huge disparity in the spread of these bank accounts.  South India has the highest financial penetration of 66 percent while East India has only around 29.9 percent financial penetration.

Recently 12 crore accounts were opened under PM Jan-Dhan Yojana. According to the Department of Financial Services, Government of India, 74 percent of these accounts have zero balance.  Since the insurance premium has to be auto debited from the bank account a large number of poor holding bank accounts under Jandhan Yojana are excluded from these two schemes.

According to the latest information around 5 crore enrolment has taken place for accidental insurance cover scheme and around 2 crore for the life insurance scheme.  The figures may go up by the time the schemes close for subscription on May 31, 2015 for this year.  Though exact figures are not available, more than 75 percent coverage under PMJJY will be offered by LIC.  The two private companies that are enrolling under these schemes are SBI Life and Star Union Dai ichi  Life.  The public sector general insurance companies are underwriting the policies under PMSBY.  There is not much of interest among the private sector due to the pricing.  May be, they will wait for a year to know the claim experience before entering this business.

In fine, these schemes cannot be called universal social security schemes.  They also cannot be termed government sponsored or run schemes as there is no element of subsidy from the government.  In fact such group insurance schemes for bank deposit holders already existed though with a higher premium. So they cannot even be called innovative.

We may also add that in 2007, UPA-I had introduced a life insurance scheme called as Aam Aadmi Bima Yojana (AABY) for rural landless workers.  The benefits under this policy were Rs.30,000 for natural death and Rs.75,000 for accidental death.  The entire premium was borne by the Central and State governments and the insured did not have to pay anything.


This scheme can be joined by any person aged between 18 to 40.  There is an assured pension on reaching the age 60 depending upon the corpus built.  The pension will be paid to the spouse after the death of the covered person and after the spouse death the corpus is repaid to the legal heirs.  Under this scheme the government pays an incentive of 50 percent of the contribution of the covered or Rs.1000 annually whichever is less. This incentive will be paid for first five years. The incentive will be paid to those who join this scheme before 31/12/2015.

Atal Pension Yojana replaces the earlier Swavalambam Scheme. Under this scheme the government incentive was a fixed Rs.1000 per year for 3 years.

The Atal Pension Yojana is like a Recurring Deposit Scheme.  The benefit under this scheme depends upon the accumulation of the savings.  If the death takes place before the eligible date for pension, we presume only the accumulated corpus will be refunded to the spouse.  Naturally, there is not much of enthusiasm about this scheme.  According to the information we have, just around 50000 have joined this scheme so far. Here too the decided amount has to be auto debited from the SB Account.

In conclusion we may have to say that these schemes by their very nature exclude rather than include a large section of the population.  These schemes cannot be a substitute to the universal social security scheme that our country needs.