Plan to expand Rs 1-lakh Jan Dhan cover may need government subsidy

MUMBAI: The government may need to cough up a small subsidy to fund the Rs 1-lakh accident insurance cover provided under the Jan-Dhan Yojana (JDY). The present restrictive insurance terms and lack of awareness have resulted in only six claims being reported under the scheme although over 7.5 crore accounts have been opened since the scheme's launch in August this year.

The Rs 1-lakh free personal accident cover with a JDY account is valid as long as the accountholder uses the RuPay debit card once in 45 days. The government has now asked the National Payments Corporation of India (NPCI), which manages the RuPay platform, to provide cover if the card is used once in 365 days.

So far, only six accident claims have been reported, which is disproportionate to the number of accounts opened. One reason for this is the time lag in issuing the cards, which has resulted in a backlog of 3.5 crore cards. Many cards have not yet been used, perhaps due to inadequate balances, which means that their insurance cover is still not activated.

The Indian Banks' Association has created a Rs 75-crore fund, of which Rs 5 crore has been contributed by NPCI and the rest by banks and financial institutions. "At present, the insurance premium is borne by NPCI and is paid out of the revenue we earn from banks when accountholders use RuPay cards," said A P Hota, MD, NPCI.

He added that this feature of linking the insurance to usage was introduced by NPCI before the launch of the scheme to promote the usage of the card. Under JDY, the government is seeking to transform the incentive scheme into a welfare scheme by ensuring continuous coverage. The government has asked NPCI to cover cardholders for 365 days after one transaction.