Cost of Life Insurance in Jan Dhan Scheme to be Borne by Centre Government

For every account opened under Pradhan Mantri Jan Dhan Yojana (PMJDY), the premium of life cover offered as an incentive with the account will be borne by the central government. Under this financial inclusion plan, the banks need to get 75 million accounts by 26 January.

The estimated premium cost for the insurance plan would be around Rs. 100-150 per person that would require the government to shell out Rs. 750- 1,125 crore for the coverage. As per the discussion between Life Insurance Corp.of India Ltd, the finance ministry, Indian Banks’ Association (IBA) and National Payments Corp. of India Ltd. (NPCI) held on 1September, LIC would not be bearing this cost.

The cost of accidental cover will be borne by NPCI - a Reserve Bank of India promoted organization. Accidental cover would be offered along with every Rupay (it is the payment gateway developed by NPCI) enabled card.

A life cover of Rs 30,000 and accidental insurance of Rs 1 lakh will be offered to every account holder.

As per the IBA estimation, banks have mobilized Rs 200 crore within 2 weeks through the fresh registration. There are some logistical issues faced by the banks that are required to get addressed by the government immediately to meet the targets in a time bound manner.

As per the chairman of a mid-sized public sector bank, Connectivity is the biggest problem faced by banks as the correspondents are unable to reach villages in a time-bound manner nor they are able to use the sales machines. Banks have asked the government to address the connectivity issue on a priority basis. Bankers informed that installation of micro-automated teller machines or opening bank branches in such areas is just impossible. General Manager of a public sector bank also informed that no-frills account holders are coming for opening new accounts with any reasons.

In return, government has promised to offer subsidized land on lease to banks for opening branches but it is finding tough to address the issues of connectivity and power on immediate basis. The rent is kept as low as Rs 5000-10000 per year.