Banks to get commission from govt for DBT

In a move that will boost fee income for banks, the finance ministry has agreed to a long pending proposal of lenders for paying commission for transactions for direct benefit transfer. This will make account opening by the lenders under the Pradhan Mantri Jan-Dhan Yojana (PMJDY) scheme viable.

Earlier, a task force headed by Nandan Nilekani, Chairman of the UIDAI recommended a commission of 3.14 per cent to be paid for all DBTs handled by banks and business correspondents. However, provision for the expenditure was not made in previous budgets.

Now, the government will make budgetary provisions for the expenses, as the department of financial services has already submitted a note to the expenditure department in the finance ministry.

According to bankers, there are several cost in opening accounts like account opening cost, hardware maintenance cost, advertisement, issuances of debit cards, remuneration to business correspondents, among others.

“The account opening cost is Rs 140 per account while we have to pay Rs 780 crore to the 120,000 business correspondents on a yearly basis. In addition there are other costs,” said a top banker from a public sector bank. He added that with more transactions, some of the costs, which are one time in nature like account opening cost, will come down.

Banks have opened more than 100 million accounts under the PMJDY scheme which was launched on August and has reached the target before the 26 January deadline. However, 75 per cent of these accounts still have no money.

Under the scheme, banks will also be providing overdraft facility of Rs 5,000 if the account peeforms satisfactorily for six months.

Bankers have also requested the government to cover the overdraft facility under credit guarantee scheme.

“It could happen that loan could turn non-performing. So we have also asked that the loans should be covered under the credit guarantee fund trust,” said another senior executive from a public sector bank.