Bankers are under tremendous pressure to meet targets, so banking correspondents, who are paid higher commissions are taking the same set of people from one bank to another to open multiple accounts. A huge waste of time and money later in weeding out dormant and multiple accounts seems inevitable

Pradhan Mantri Jan Dhan Yojana (PMJDY), aimed at opening bank account for every household across the country, was implemented with brutal force following Prime Minister Narendra Modi personal push. Hapless bankers, working day and night, opened crores of bank accounts under the PMJDY. The question that everybody ignored and is being asked by banks is, who are the real beneficiaries of these new bank accounts and who will bear the cost of maintaining, de-duplication or shutting down dormant accounts? Interestingly, after launching the scheme, the government directed banks to undertake a survey to identity households who do not have a bank account. In fact, this exercise should have done before the hurried launch of Jan Dhan, say bankers.

There are endless anecdotes and internet jokes doing the rounds about how unbanked persons rushed to open accounts assuming it would immediately give them Rs5,000 in cash (overdraft) and the ability to encash Rs1 lakh in insurance. Some even opened four and five accounts in order to multiple the insurance cover, they believe will be available to their families. Harried bankers are ending up spending a lot of productive time explaining to people when and how these benefits will be available.

"Multiplicity of accounts in the name of same person is a serious operational risk. The scheme does not prevent opening of multiple accounts, i.e. opening the accounts in different banks to avail the benefits under the scheme. There is no mechanism to check such misuse," says an editorial from 'Officer's Voice', a periodical from Corporation Bank Officers' Organisation (CBOO).

The 'force' behind achieving the numbers was so powerful that bankers were directed to open account for anyone without even basic document required under know-your-customer (KYC) norms. In fact, RBI through a notification issued on 26 August 2014  asked banks to open small account for anyone without any officially valid documents by just submitting self-attested photograph. The validity for such accounts is 12 months, and the account holder can conduct transactions up to Rs1 lakh in this period only. Thereafter, he needs to submit documents required under the KYC norms to continue to operate the account.

However, the dilution in KYC norms while opening the accounts has created fear of accountability among bank officials in case of misuse of these accounts by unscrupulous elements. United Forum of Bank Unions (UBFU), an umbrella organisation of bank unions across the country, has demanded protection to bankers who have been implementing the PMJDY scheme.

According our interaction with field staff from some banks, their performance was monitored not only by their seniors or any government agency, but also by political party workers, especially Bharatiya Janata Party (BJP). Local office bearers of BJP were openly interacting with bankers and checking and reporting the progress of the PMJDY to their party bosses. The 'fear factor' in banker's mind about this ‘shadow monitoring’ was so large that some simply pleaded the party workers to help them in enrolling more people under the PMJDY.

The editorial from 'Officer's Voice', says, “The pressure on bank employees and officer to open accounts under the scheme is tremendous. The employees working in branched with allotted villages are required to work from 8am to 8pm on every Saturday till 26 January 2015 and conduct camps to enable people to open accounts under the scheme. The public sector banks (PSBs) are already under tremendous pressure due to acute staff shortage due to absence of recruitment during the past two decades and large scale retirement and resignations under voluntary retirement scheme (VRS).”

It said, "These multiple accounts could also be utilised by unscrupulous elements for money laundering. Unless there is a centralised database for all these accounts, this risk will remain.” It is in this context Dr Raghuram Rajan, Governor of Reserve Bank of India (RBI), cautioned bankers about running behind the number game instead of achieving the core objective of the scheme.

Earlier, the RBI launched the financial inclusion programme to provide financial services to people in unbanked areas. According to the RBI data, since March 2010, the number of zero balance accounts (no-frills account or Basic Savings Bank Deposit Account- BSBDA) in India has doubled to 103.2 million from 49.33 million in March 2010. There is cost attached for banks even to maintain record for no-frills account irrespective of whether there was any transaction conducted in the account or not.

Although the government has promised to compensate banks for the cost incurred in the PMJDY, the modalities are yet to be worked out. Even of the government compensates banks, it is the taxpayers who will end up being billed for this exercise. As per the cost or premium for the Rs30,000 life insurance for each account holder under the PMJDY, is concerned, there still no clarity. Life Insurance Corp of India (LIC) has expressed inability to bear the cost. In this scenario, the government would pay the cost from the exchequer, ultimately from the taxpayers’ pocket.

There is no doubt that the future may hold several disruptive business models for banking many of which may be enabled by technology. While encouraging innovation, it is the role of the government and regulators to ensure that these do not bring ruin to the nation’s financial system. The PMJDY appears to be heading in that direction only.

Under the scheme, account holders were promised a free RuPay Card with accident insurance of Rs1 lakh, overdraft facility of Rs5,000 after successful operation of initial six months and a life cover up to Rs30,000 for those who would open account under the PMJDY before 26 January 2015. No wonder, people who have bank account also rushed to open the account, as the freebies offered were very attractive. The announcement that the additional benefits will be available to existing accounts came very late. This was the same warning issued by RBI governor Dr Raghuram Rajan for banks to be careful people may be tempted to open multiple accounts. Senior RBI officials have also been warning banks about ‘smurfing’ and ‘money muling’.

According to report from Mission Director and Additional Mission Director for the PMJDY, as on 2 October 2014, bankers across the country opened 5.29 crore accounts under the scheme. Out of this, 3.12 bank accounts were opened in rural and 2.17 in urban areas. So far, banks have issued 1.78 crore RuPay cards. The government has asked banks to increase their capacity to issue RuPay cards and clear the backlog 'quickly'. Again, the question is who will bear the cost of the RuPay card? Will the regular bank customers, who may be using savings account or depositors, be made to pay for this extravaganza through increased service charges?