The first phase of PM Jan Dhan Yojana would last till August 15th, 2015, and will be primarily focused on the opening of savings bank account, issuing of Rupay debit cards to new account holders, provision of accident insurance cover and extending of loans/overdraft facilities to these new account holders. A Credit Guarantee Fund to cover defaults on overdrafts is also expected to be created this year. Some experts believe that it might cost the government as much as Rs 70,000 crore. In the second phase which will begin from August 2015 and last till August 2018, it will be focused on the provision of micro-insurance and enrollment in pension services.
Loan under Pradhan Mantri Jan Dhan Yojana (PMJDY)
As incentives to new account holders, they can avail an overdraft (loan) of up to Rs 5000 rupees on their savings account which will be given at the discretion of the Bank. This loan amount would then be further raised to Rs 15,000 if there is timely repayment of the first loan taken by the account holder.
This provision of overdraft on each savings account is to primarily make cheap credit available to ordinary citizens in India who would have to otherwise depend on money lenders who charge very high-interest rates.
The overdraft will only be given to those savings accounts which have been linked to an Aadhaar Unique Id, this is to prevent fraud and ensure that individuals do not open multiple savings accounts with the aim of cornering the credit facilities. The PMJDY scheme has taken a leaf from the Microfinance Sector in India where Microfinance Companies initially provide a small loan and only later increases the size of the loan disbursement when the microfinance client has successfully repaid his first loan. This ensures that only creditworthy individuals with the financial capacity to repay, get loans.
