A lot of people seem to have reservations on the loan component of PMJDY. One needs to understand the basic idea for need of having a loan (OD) product linked to the savings account for this market segment. Savings is difficult and much cherished. So for small savers, there is so much emotional attachment to the savings that for small needs they would rather borrow at higher rates of interest than liquidate their savings. The trick to making this scheme successful will lie in ensuring that (a) accounts can be opened without hassles / touts (wishing for the unthinkable?), (b) transactions can be conducted conveniently, at low cost (not just in terms of money but also the time), (c) the whole process is secure, (d) transaction costs do not touch the roof for banks (that will leave little incentive for them to operate the scheme). Strict monitoring of costs (possible due to all (nearly all) banks) being on CBS. And (e) if some of the transaction costs cannot be wished away (say cost of issuing the the smart cards) - that part should be picked up by the government.
Posted on: Sat, 30 Aug 2014 04:57:27 +0000