Whether we employ peons in our companies or we employ house helps at home, we all (at least you, my clients) are employers at some level or another. These employees, while not below the poverty line, are extremely vulnerable to catastrophic events such as sudden illness, life-threatening accidents and the often ignored lack of income after retirement. I call upon each one of us to examine how we can take upon ourselves small steps to promote financial inclusion in this section of society. In light of this, as a practicing Investment Adviser, I thought by writing a short blog critiquing the various schemes brought out by the Government of India to promote financial inclusion, I could in my own small way contribute to our national endeavor of financial inclusion for all.

I will briefly talk about the following schemes : (a) Pradhan Mantri Jan Dhan Yojana, (b) NPS Swavalamban, (c) Pradhan Mantri Suraksha Bima Yojana, (d) Pradhan Mantri Jeevan Jyoti Yojana, (e) Atal Pension Yojna and (f) Sukanya Samruddhi.

(a) Pradhan Mantri Jan Dhan Yojana
This scheme forms the foundation for the implementation of nearly every other scheme intended for financial inclusion. The moment a bank account is opened under this scheme, there will be an INR one lakh accident insurance cover and a life cover of INR 30,000 available, as I am to be believe with no premium needed to be paid – this is simply wonderful and should be a no-brainer. As an icing on the cake there is an INR 5,000 overdraft facility available on the account provided certain conditions are fulfilled. Every one of our unorganized sector employees must enroll – especially since this is at no cost to them.
More information can be found here:

(b) NPS Swavalamban

Available for citizens of India working in the unorganized sector, this encourages participation in the National Pension Scheme with a contribution between INR 1,000 to INR 12,000 per annum and the government co-contributing INR 1,000 per annum (till FY 16-17). No doubt this encourages a saving mindset and is a step forward – however I have my reservations. First as it is with the standard NPS, there are far too many restrictions around withdrawal, which I would not like to elaborate upon now. Secondly and more importantly, there is a restriction in the investment choices available under the Swavalamban option wherein equity exposure beyond 15% is not allowed for the corpus. To create a corpus for retirement, inflation beating returns are required and this can be achieved only through more aggressive exposure to equity. No doubt the poor and vulnerable sections of society have low risk-taking ability, but nevertheless a 15% exposure is too low and I feel over similar tenures, they are better served by investing in a low cost index fund or in the standard NPS model where maximum exposure to equity is atleast higher at 50%.
More information can be found here:

(c) Pradhan Mantri Suraksha Bima Yojana
In finance parlance this is an Accident Insurance scheme offering accidental death and disability cover on account of an accident. At a premium cost of just INR 12 per annum and affording a risk cover of INR two lakhs on accidental death & full disability and an INR one lakh for partial disability – this is a fantastic opportunity for vulnerable sections of our society to get access to a cost-effective accident insurance cover which their dependents would immensely benefit from if some unforeseen accident were to happen to them. Not only is it difficult to get any insurer to insure a two lakh accident death cover (it being too low) but also it is my suspicion that the premium rates in this scheme are a fraction (probably a fifth to a tenth) of that available under private insurers.
To give you an idea, of how helpful this can be, INR two lakhs today is worth an income stream of ~ INR 1,234 per month for 30 years from today (discounted at 8%). Families depending on sole bread-winners with family incomes ranging below ~INR 15,000 per month will benefit immensely.
More information can be found here:

(d) Pradhan Mantri Jeevan Jyoti Yojana
This is simply a term insurance cover for life, wherein at a cost of INR 330 per year, one can get covered for INR two lakh in case of death (for any reason) of the insured.
To give you an idea, if a 30 year old man were to insure himself for INR four lakhs for a term of 25 years, he would have to pay about INR 3,200 per annum to a private insurer. You can see how cost effective this scheme is for vulnerable sections of our society, where not only do they not have access to such low term covers (private insurers do not provide such low cover for extended terms) but also the premium rates are again, as I illustrate above about a fifth of what is available in the market.
More information can be found here:
http://financialservices.gov.in/jansuraksha/final rules PMJJBY.pdf

(e) Atal Pension Yojna (APY)
This is an assured pension scheme combined with a life cover if death were to happen before the age of 60 years. For example, a 35 year old person will need to contribute INR 181 per month till the age of 60 after which he/she gets an assured pension of INR 1000 per month till his/her death.
If one were to assume the 35 year old man in the above case survives till the age of 80 years, the internal rate of return of this scheme works out to be ~6.59%. The real returns would probably be negative, when this is juxtaposed against the Government of India’s abysmal historical track record on inflation. I am worried that this scheme will get traction simply based upon the idea of an 'assured' return. The problem with all government debt (including this one which is a kind of debt), is that the government never defaults directly, but surreptitiously through loose fiscal policy resulting in money printing and inflation and thus ultimately devaluation of the rupee. 40 years from today when the above 35 year old gentleman will be 75 years old, his pension of INR 1000 per month would buy him goods not worth more than INR 62.5 today (if one were to project the Government of India’s track record into the future).
It is not clear to me if the life cover that accompanies this scheme is applicable throughout the life of the pensioner or only if death occurs before age 60 years. This needs more investigation.
More information can be found here:

(f) Sukanya Samriddhi
To encourage savings in the name of the girl child, this scheme was introduced. This is a laudable idea in a country where most investments are reserved for male heirs. The scheme today offers 9.1% interest that is compounded annually and the principal of contribution of a max of INR 1.5 lakh per year is tax deductible under 80C. Also the full maturity amount is exempt from tax. Contributions can be made till the child turns 14, and maturity without penalty is possible only when the child turns 21. This is pretty similar to the Public Provident Fund Scheme except that the scheme’s current interest rate is higher than PPF rates. This is a decent scheme for a risk averse investor. However, in my opinion, leaving aside the 'girl child' question, from a purely investment perspective, over a similar period, investing in a simple index tracking fund would be superior, simply given the time period involved (> 10 years).
To me the problem with this scheme is that while it is extremely attractive for an individual in the highest tax bracket (due to the 80C deductions), the upper limit of INR 1.5 lakh is too low to really move the needle for the investor. On the other hand for someone in a lower tax bracket, the benefits reduce since the tax shield is lower.
Nevertheless, within the debt portion of a portfolio, this scheme along with the PPF scheme gets first priority and only after they are maxed out should alternative debt investments be considered.
More information can be found here:

Hike in National Pension Scheme (NPS) tax deductible by INR 50,000
Strictly speaking this does not come under financial inclusion. The budget of 2015 has given an additional INR 50,000 tax deductible under 80CCD (1B), which is over and above the 1.5 lakh limit under 80 CCE. In other words, NPS is the only scheme where an extra tax benefit of INR 15,450 can be earned (if you are in the 30% tax bracket). While the tax benefit in itself is a significant step forward, the NPS itself has too many restrictions around withdrawal, limits on exposure to equity and no transparency in the underlying basket of securities your nominated NPS fund manager is investing in. While I like the extra tax deduction available, the NPS scheme itself needs to be revamped to give the Indian saver sufficient options and transparency into how his pension funds are being invested.