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Jan Dhan Yojana: Initially, overdraft amount might be small -Nupur Anand
-The Business Standard


Based on the credit history banks may later decide to extend the amount

Under the Pradhan Mantri Jan Dhan Yojana, the overdraft facility initially offered by banks will be less than Rs 5,000, the highest under the scheme. Based on credit history, lenders might extend the amount at a later stage.

Earlier, the finance ministry had clarified a lower amount might be extended under the overdraft scheme. Under this, on opening a bank account, holders are eligible for an overdraft facility of Rs 2,000, which can be extended up to Rs 5,000, based on the consumer's credit and transaction history. Account holders will also get a RuPay debit card with an accident cover of Rs 1,00,000. Also, those opening accounts by January 26 will be entitled to an additional life insurance cover of Rs 30,000.

Bankers say to avail of the overdraft facility, customers have been queuing up to open accounts. On condition of anonymity, a banker said most banks were likely to start with a small overdraft facility of about Rs 500, instead of Rs 5,000, as seemed to be the understanding among new account openers.

"Though banks have been given the leeway to extend an overdraft facility on the basis of credit history, as the government is very aggressive on this plan, banks won't want to discourage too many customers for fear of complaints, at least initially. As a result we will start with a small amount of up to Rs 500 at the first stage," said an executive at a public sector bank.

Another banker agreed. "There seems to be a misconception among account openers that they don't have to return the money under this scheme. As a result, we think it is better to start extending a smaller amount initially, which could be raised later," he said.

Bankers said several account openers seemed to believe under the scheme, Rs 5,000 would be deposited in their accounts, as will subsidies and freebies. As a result, it was important to start with a smaller amount, they added.

The government plans to open 75 million accounts by January 26, 2015. On the day the Jan Dhan Yojana was launched, 15 million accounts were opened under the scheme.