Raj Kumar Sharma, 48, lines up at a weekly camp set up by the State Bank of India in his sugarcane-growing village in northern India to open his first-ever bank account. An ambitious, new exercise to bring nearly 600 million people into the formal banking system by January is now underway in India. (Rama Lakshmi/TWP)

Raj Kumar Sharma, a milk-seller with just one cow, used to think bank accounts were “only for important people.” That changed after he heard a pitchman in the village lane beating a drum and touting an easy new way to sign up for an account.

“Your account can make your destiny,” the drummer announced.

Soon, Sharma had signed up for his first-ever account at a camp run by the State Bank of India in this rural northern village, part of an ambitious government exercise to bring nearly 600 million Indians into the formal banking system by January.

Launched by Prime Minister Narendra Modi, the program aims to include the poorest and the most marginalized in India’s economic growth and reverse a recent slide in household savings.

Thousands of bankers and banking agents have fanned out across the country to reach people in far-flung villages and city slums. To open an account, reams of identity documents are no longer needed — and money for a deposit isn’t necessary, either.

Analysts say it is uncertain whether the new accounts will remain active, because India lacks the network to provide service to so many people. Even so, since August, more than 55 million accounts have been opened with a total of almost $750 million in deposits.

“There is a lot of cash-based transactions in India. We want to bring it into the banking system so that the cash becomes productive, the poor get into the habit of small savings and get access to credit,” said Gurdial Singh Sandhu, a secretary in the Ministry of Finance in New Delhi. In the past six years, India’s household savings dropped by 5 percent, he said.

‘A national priority’

According to the World Bank, only 35 percent of India’s 1.2 billion people have bank accounts; the government says the figure is close to 58 percent. About 73 percent of farming families in rural areas have no access to formal sources of credit, according to a 2013 report by the Reserve Bank of India. Many rely on money lenders or informal women’s groups for small loans.

There are 115,000 bank branches in India, up from 60,000 a decade ago. But vast swaths of hinterland have none.

In the past 15 years, the microfinance industry expanded to bridge the gap to some extent, but the sector gained a bad reputation in recent years because of some agents’ aggressive loan collection practices. Some companies also operated Ponzi-like schemes among the urban poor.

In an e-mail to bank officers in August, Modi called the account-opening drive “a national priority.” It was “untenable,” he said, for so many Indians to be deprived of basic banking benefits.

The new accountscome with a debit card, an accident insurance policy worth about $1,600, and a short-term loan of about $100 after a year.

Modi’s banking push is not India’s first. Past efforts fizzled because the government did not monitor them, and new accounts remained dormant, Sandhu said.But the freebies, Modi’s personal interest and the target of reaching every home are likely to make this campaign more effective, he said.

“Many people are coming in hordes to open accounts because they think government welfare benefits will come their way in the future through these accounts,” said Preeti Mall, a manager at the State Bank of India near Prangarh.

Doubts and optimism

But one lingering question is whether the accounts will survive. Unable to build new bank offices quickly, India adopted in 2006 what has come to be called the “branchless banking” model, a system that has seen some success in Pakistan, Bangladesh and Kenya.

The banks operate through a network of village “business correspondents” who function sort of like human ATMs. They conduct transactions — such as deposits and withdrawals of small amounts — with a cellphone and computer from corner shops.

It has been harder to make the model work in India because banks view business correspondents as unprofitable.

“Opening new accounts is an easy thing, but there is no way the country is geared to service these accounts and keep them alive,” said Abhishek Sinha, co-founder of Eko India Financial Services, which works with store owners in 10 states whose businesses double as banks. “Nobody is measuring the activity in these accounts.”

If Modi’s program meets its goal of linking every home to a bank account, tens of thousands more business correspondents will need to be hired, up from 200,000 today.

In the village of Girdharpur, business correspondent and store owner Rakesh Kumar complained that banks do not pay him on time. He said that he has helped open 276 bank accounts since September but that villagers have yet to receive their account numbers or debit cards.

Amid the push, banks have been opening accounts for almost anyone who shows up at the enrollment camps, without checking to see whether they already have accounts or are opening accounts elsewhere. Belatedly, Sandhu said, banks are surveying households to check for account duplication.

As for Sharma, the milk-seller, he said he sees hope — and an opportunity to expand his business.

“Whenever I needed extra cash, my mother went to a neighbor and asked,” Sharma said. “If I can get a loan with dignity from a bank, I will buy another cow.”