Pradhan Mantri Suraksha Bima Yojana (PMSBY)

Pradhan Mantri Suraksha Bima Yojana (PMSBY) is a government-backed accidental insurance scheme launched in 2015 with the objective of providing affordable accident risk coverage to a wide section of the population. The scheme is designed to offer basic financial protection against death and disability caused by accidents, particularly for economically weaker and vulnerable groups. In banking, finance, and the Indian economy, PMSBY is an important component of the social security framework and plays a key role in strengthening financial inclusion and household risk protection.
By delivering insurance through the banking system, PMSBY integrates social welfare objectives with formal financial infrastructure and expands the reach of risk mitigation instruments.

Concept and Objectives of PMSBY

Pradhan Mantri Suraksha Bima Yojana is an accident insurance scheme that provides financial compensation in the event of accidental death or permanent disability. The scheme is characterised by simplicity, low premium cost, and ease of enrolment through bank accounts.
The main objectives of PMSBY are:

• To provide affordable accident insurance coverage to a large population
• To enhance social security for low-income and informal sector workers
• To reduce financial hardship arising from accidental death or disability
• To promote insurance penetration through the banking system

By addressing accident-related risks, PMSBY complements life insurance and health schemes within India’s broader social protection architecture.

Coverage and Benefits under PMSBY

PMSBY provides insurance coverage against accidental death as well as permanent total or partial disability resulting from an accident. The benefit amount is paid to the insured or the nominee, depending on the nature of the claim.
The scheme operates on an annual renewal basis, with coverage continuing as long as the premium is paid each year. The simplicity of coverage terms makes PMSBY easily understandable for first-time insurance users.

Eligibility and Enrolment

The scheme is open to individuals within a specified age group who hold a savings bank account. Enrolment is voluntary and requires the consent of the account holder. Each individual is eligible for only one PMSBY policy, even if multiple bank accounts are maintained.
Premium payment is made through auto-debit from the linked bank account, ensuring convenience and continuity of coverage. Nomination is mandatory, facilitating smooth claim settlement.

Role of Banks in PMSBY

Banks are the primary delivery channel for PMSBY. They are responsible for enrolling customers, facilitating auto-debit of premiums, and acting as the interface between policyholders and insurance companies.
Through PMSBY, banks extend their role beyond conventional banking services to include insurance distribution. This strengthens customer engagement, particularly in rural and semi-urban areas, and supports the broader objective of inclusive finance.

Role of Insurance Companies

General insurance companies underwrite the risk under PMSBY. They are responsible for claim processing, verification, and settlement in accordance with the scheme guidelines.
The group insurance model adopted under PMSBY allows insurers to spread risk across a large and diversified pool, making it possible to offer coverage at a very low premium.

Regulatory and Institutional Framework

PMSBY operates within India’s financial regulatory framework. The Reserve Bank of India supports the scheme indirectly through its regulation of banking operations, basic savings bank deposit accounts, and financial inclusion initiatives.
Insurance operations under PMSBY are governed by insurance regulations that ensure transparency, consumer protection, and financial soundness of participating insurers.

Contribution to Financial Inclusion

PMSBY has played a significant role in extending accident insurance coverage to individuals who were previously uninsured. Many beneficiaries under the scheme belong to informal employment sectors where occupational and accident risks are high.
By linking insurance enrolment to bank accounts, PMSBY encourages regular interaction with the formal banking system and promotes awareness of risk protection and insurance benefits.

Significance for the Banking and Financial System

For the banking system, PMSBY has expanded the scope of services offered at the grassroots level. While the scheme generates limited direct revenue, it strengthens customer relationships and enhances banks’ role in delivering government-backed financial products.
Wider insurance coverage also contributes to financial stability by reducing household vulnerability to sudden income shocks caused by accidents.

Economic Significance in the Indian Economy

From a macroeconomic perspective, PMSBY contributes to social and economic stability by providing financial support to families affected by accidental death or disability. Insurance payouts help prevent distress borrowing, reduce reliance on informal credit, and support household consumption.
By improving social security coverage, PMSBY complements other welfare and financial inclusion initiatives, contributing to inclusive and sustainable economic development.

Advantages of Pradhan Mantri Suraksha Bima Yojana

PMSBY offers several advantages:

• Extremely affordable premium for accident insurance
• Simple enrolment through existing bank accounts
• Automatic premium deduction ensuring continuity
• Financial protection against accident-related risks