PMJDY aims at salvaging poor from clutches of moneylenders but at the sametime would affect RBI’s effort to bring down NPA
Pradhan Mantri Jan Dhan Yojna (PMJDY) -- the ambitious financial inclusion programme -- to be launched by PM Narendra Modi on Thursday is likely to leave many loose ends as the much brandished Rs 5000 overdraft facility and Rs 1 lakh life cover per account holder is estimated to leave a huge financial burden on the already high-NPA burdened banks.
As per highly placed sources in Finance Ministry there has been a sharp difference of opinion between the North Block (Finance Ministry) and the RBI over the rise in the NPAs with the PMJDY. PM Modi, who has directly emailed to the bank officials on Monday and aims to open a bank a account for 7 crore households through a Rupay debit card, has been doubted with many financial pitfalls.
Given poor Monsoons, higher inflation and a sub-5 per cent growth, several banks have expressed their pessimism that the NPAs are further likely to grow in the coming months. And the recovery of the locked assets are likely to be less without a turnaround in the industrial growth.
“There has been a stiff differences of stand between the Ministry and the central bank on the credit outflow which will further increase the NPAs of the banks,” highly placed sources in the Finance Ministry told The Pioneer.
This is particularly so as the RBI Governor has of late been on a overdrive to bring down the NPAs of the public sector banks (PSBs) . The NPA of PSBs has risen to over 4 per cent of the gross advances as per the latest figures.
RBI itself has warned that the gross NPAs are likely to grow to 4.6 per cent in September 2014 and stand to 4.4 per cent by March 2015. This brings India amongst one of the mid level of high NPA countries in the world as per the IMF.
The first phase of the PMJDY is expected to be implemented through the banks and their branches. While NBFCs and Microcredit agencies and banking correspondent BCs are expected to enelarge the reach further of the schme in the second phase.
Besides the operating costs estimated to be Rs 5000 per BC, the fact that the underrecoveries or unrecovery will also put a big financial pressure on the system. This apart the provision of banking correspondents which will include local traders who would need a credit guarantee backup. Experts also say:”Even though the PMJDY has a good motive yet programme’s Rs 5000 of assistance is too small to help the poor in any major way.”
The PMJDY aims at salvaging the poor from the clutches of moneylenders particulary in the rural hinterland. They also hold that given the observation that the rural banking accounts largley become dormant with the account holder not utilizing the facility.
RBI Governor Raghuram Rajan has been on a warpath to egg on banks particularly the PSBs to recover bad loans and stressed assets. Infact, the RBI has been fast tracking the recovery process through the Asset Reconstruction Company (ARCs) which have lapped up as much as Rs 17,000 crore by the first quarter last fiscal. Out of the Rs 17000 crore as much as Rs 16,000 crore - the highest -- has been on account of bank’s bad loans . With this excess pressure the banks have been calling for the creation of the National Asset Management Company in order to take care of stressed, fast recovery of bad loans as well as recapitalization of the banks.