Kudos to Prime Minister Mr. Narendra Modi for swinging into action at last! His first attempt with Pakistan got mismanaged. Now he has acted in the pursuit of policy that could be a game changer for the Indian people. I refer to the Jan Dhan Yojana scheme that opens banking to the poor and makes India genuinely an inclusive society. Unlike well intentioned UPA government schemes that fell apart due to poor implementation, the Jan Dhan Yojana scheme made a flying start that must have involved stupendous groundwork accomplished silently during the last three months. The scheme intends reaching 75 million households very soon. At the launch of the scheme 15 million bank accounts were opened on a single day! This spectacular start if followed with continued zeal can become transformational.

Indira Gandhi introduced bank nationalization announcing similar intent. But the scheme went horribly wrong. Commenting on it Mr. Modi said:

“It was done with the objective of bringing people into the economic mainstream… After 68 years of Independence, not even 68% of India’s population has access to banking.”

Bank nationalization failed because of corruption and crony capitalism. Bank directors were appointed by ministers having vested interest in making deals. As a result if the total amount of bad debts incurred by public sector banks during the entire period were calculated the result would be stunning. Noted economist and author Mr. Gurcharan Das enthusiastically welcomed the Jan Dhan Yojana scheme but expressed reservations about public sector banks implementing the project satisfactorily. He recommended many private bodies to be also deployed to widen the scope of the scheme.

The London Economist of August 2012 pointed out that India had a much bigger amount of bad debt than officially acknowledged. The amount of this debt gets obscured by banks resorting to 'restructured' loans. Quite simply instead of declaring a debt bad its original terms are softened to enable the borrower to continue with the loan. In 2012 these restructured loans were estimated by the journal to be US$ 43 billion. By misusing the device of restructuring loans banks and rich businessmen can continue looting the nation while the Reserve Bank remains a helpless bystander. Currently for example struggling airlines such as Air India and Kingfisher Airlines have both incurred massive debt. But they remained technically non-defaulters because of restructured debts.

It may be noted that even salaries are not paid to airline employees while airline executives splurge money. The Economist estimated that 93% of restructured loans are on the books of public sector banks. However even if initially there are glitches and setbacks to the Jan Dhan scheme these can surely be overcome through experience and continued reform. The important truth is that this is the first concrete action by the Modi government that will give promise to the people of experiencing “Achhe Din”. Till now Mr. Modi was merely a magician with words. Now he will be seen as a man of action. He must not lose the momentum.