“We expect that mostly vegetable sellers or similar small shop owners will use this facility for their daily businesses. This is expected to help them get more into the formal banking system, as they will be making repayments in order to stand eligible for large value loans,” the official said.
As per the latest data, only 32 lakh of PMJDY account holders had availed Rs 354 crore as overdraft till December 2017. “This was mostly because the facility was available after six months of the satisfactory conduct of the account. Now, with relaxed guidelines, we expect more disbursements,” the above quoted official said.
The aim is to inculcate banking habit and creation of credit histories of account holders, he added. A senior bank executive, however, said that there may be a risk of such loans going bad. “Given that elections are around the corner, some may take this as a freebie, thereby impacting their ability to take further loans,” he said.
But the finance ministry official quoted earlier said around 8 crore accounts are linked with some sort of Direct Benefit Transfer (DBT) scheme and there is little risk of these small value ODs turning into bad loans.
Another government official said the trend in Aadhaar Enabled Payments System (AEPS) shows there will be a significant demand for micro loans. Most AEPS transactions are done via hand-held devices usually provided through bank mitras or installed at public distribution shops.
AEPS transactions have increased from 1.2 crore per month in July 2016 to 12.4 crore monthly in June 2018.
“We have now the basic framework prepared and it is time to on-load other financial products,” he added. Last week, the government extended and revised PMJDY. The existing Over Draft (OD) limit of Rs 5,000 was also raised to Rs 10,000.