March 12, 2015

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Priority Sector lending for Rs. 5,000 overdraft under Pradhan Mantri Jan-Dhan Yojana

As per the new directions of RBI bank overdrafts of Rs 5000 will be treated as priority sector lending.

"...Overdrafts extended by banks up to Rs 5,000 in PMJDY accounts will be eligible for classification under priority sector advances ('others' category) as also weaker sections, provided the borrowers household annual income does not exceed Rs 60,000 for rural areas and Rs 1,20,000 for non-rural areas," the Reserve Bank of India (RBI said in a notification).
Previously the facility of overdraft was permitted to those who have Aadhaar linked accounts along with the satisfactory operation of the account at least for a minimum period of 6 months.
Priority sector are those privileged sector which could not find proper and timely credit facility in the absence of exceptional dispensation.
As hitting a great milestone PMJDY is running with the opening of 12.5 crore accounts in a small span of 8 months.  With this there are emerging needs of Demat account is coming up in the way.
RBI has advised to provide these overdraft facility to account holder adequately since it will fulfill the basic need  with small denominations of students for their education, small and micro enterprise,  housing needs of poor people, farmers for agricultural activities and other low class income groups.
Replica of Jan Dhan Yojana Model is getting ready; Demat accounts would be next tale

After the resounding success of Pradhan Mantri Jan-Dhan Yojana Modi Government is envisaging to hit the grounds with the Demat accounts. PMJDY is running with the opening of 12.5 crore accounts in a small span of 8 months to fulfill the needs of financial services at every level. Disinvestment Secretary Aradhana Johri is of idea that this drive for demat accounts is imperious.
SEBI has been contacted for discussions by the Government to review appending trade on secondary market on the day of the offer for sale to discourage speculation. Johri explains "The reasoning is that OFS is a huge transaction and the secondary market swings with a very small amount. Maybe a lot of small investors who are not market-savvy will get confused by that. So far Sebi has not agreed, but we are in talks".
Since the Jan Dhan Yojana has a wider effect on the economy it is suggested to launch the demat account idea from a similar robust platform. The cental government has already kick off the idea and from the sale of 10% stake in Coal India has poised Rs 22,500 crore eventually.
This deployment of firm technology has already enclosed Jan Dhan Yojana as an ambitious social security scheme and may have the similar upshot with even better results though demat accounts can be quest as an intangible security in long run.
As per the recent reports market will get depth and perk with more investments and would diminish the wrinkles of discrepancy of provision sector wide.


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