28-August-2024-Editorial

PRADHAN MANTRI JAN-DHAN YOJANA (PMJDY)

The Pradhan Mantri Jan-Dhan Yojana (PMJDY) was launched on August 28, 2014, as a flagship financial inclusion initiative of the Government of India.

Its primary objective is to provide affordable financial services like banking, credit, insurance, and pensions to all citizens, especially the underprivileged.

Now, as it completes a decade, PMJDY has witnessed remarkable growth, expanding access to formal financial services for millions across the country.

Achievements of PMJDY

Account Expansion

• PMJDY started with 147 million accounts in March 2015 and grew to 520 million by March 2024.
• The program has made significant strides in financial inclusion, with an increase in the number of beneficiaries year by year.

Deposit Mobilisation

• The scheme’s total deposits increased from Rs 15,600 crore in March 2015 to Rs 2.32 trillion by March 2024, reflecting a compound annual growth rate of 30%.
• The average balance per account increased from Rs 1,065 in 2015 to Rs 4,476 in 2024, nearly quadrupling in the last decade.

Expansion of Banking Infrastructure

• More than 1.3 million banking touchpoints have been mapped on the Jan Dhan Darshak (JDD) app, covering 601,000 villages.
• 99.7% of these villages now have access to banking services within a 5 km radius, indicating an extensive banking network across rural India.

Rural-Urban Parity

• As of 2024, 53.13 crore PMJDY accounts have been opened, with 66.6% located in rural and semi-urban areas.
• Women hold 55.6% of these accounts, underscoring the program’s role in empowering women financially.

Boost in Digital Payments

• Unified Payments Interface (UPI) transactions increased from 920 million in 2018 to 131.2 billion in FY 2024.
• RuPay card usage surged from 670 million in 2018 to 1.26 billion in FY 2023, further promoting digital transactions.

Direct Benefit Transfer (DBT)

• PMJDY played a crucial role in transferring approximately USD 361 billion directly to beneficiaries via 312 key schemes from 53 central government ministries.
• During the COVID-19 pandemic, over 206 million women PMJDY account holders benefited from a one-time ex gratia payment under the Pradhan Mantri Garib Kalyan Yojana (PMGKY).

Overdraft (OD) Facility

• As of March 2024, around 1,17,701 overdraft accounts were opened, with a sanctioned amount of Rs 190 crore.
• The OD facility offers crucial credit access to low-income individuals, with a utilization rate of 80.5%.

Reduced Zero Balance Accounts

• While zero-balance accounts are allowed under PMJDY, only 8.4% of accounts are without balance, indicating increased usage and deposits in these accounts.

International Recognition

• The World Bank praised India for its rapid financial inclusion efforts, stating that the country achieved what would normally take five decades in just six years.
• The Jan Dhan-Aadhaar-Mobile (JAM) trinity has helped increase financial inclusion to 80% of adults, up from 25% in 2008.

Key Features of PMJDY

• No Minimum Balance Requirement: Account holders are not required to maintain a minimum balance.
• Free Debit Card: A RuPay debit card is provided free of charge.
• Accident Insurance: Accounts opened after 2018 are eligible for Rs 2 lakh accident insurance coverage.
• Overdraft Facility: Eligible account holders can access up to Rs 10,000 as an overdraft.
• Access to Government Schemes: PMJDY account holders are linked to schemes like the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY), and Atal Pension Yojana (APY).

Challenges Associated with PMJDY

Multiple Accounts

• Many individuals open multiple accounts across different banks to take advantage of benefits like insurance coverage and overdraft facilities, leading to account duplication.

Economic Burden on Banks

• Low-balance accounts create financial strain on banks due to the high cost of managing a large number of accounts with minimal deposits.

Potential for Money Laundering

• There have been instances where Jan Dhan accounts have been used for laundering money, particularly after demonetization in 2016, posing regulatory challenges.

Declining Overdraft Usage

• Although an overdraft facility is available, many banks hesitate to offer it, reducing the scheme’s ability to provide accessible credit to low-income individuals.

Misuse by Business Correspondents (BCs)

• Business correspondents (BCs) sometimes exploit their role by charging extra fees for services meant to be free, causing distress for low-income account holders.

Risk of Bad Loans

• The OD facility may result in bad loans for banks, as there is no clear mechanism for debt recovery in case of defaults.

Financial and Technological Illiteracy

• Many rural account holders lack the financial literacy to make informed decisions about savings, loans, and investments.
• A survey by Visa indicated that 65% of Indians have inadequate financial literacy, which hampers the effective use of banking services.

Way Forward

Centralized Account Verification

• Implement a centralized system to prevent account duplication by using biometric and digital identity verification to streamline account management.

Strengthen Financial Literacy

• Promote awareness and education programs to improve financial literacy, particularly in rural areas, empowering individuals to make informed financial decisions.

Enhance Overdraft Penetration

• Increase the availability and usage of overdraft facilities, making credit more accessible to low-income account holders.

Focus Beyond Accounts

• Expand the focus from just opening accounts to ensuring these accounts are actively used for savings, micro-insurance, and micro-credit schemes.

Improving Access to Insurance

• Increase the coverage of PMJDY account holders under micro-insurance schemes to provide additional financial security.

Conclusion

PMJDY has made significant strides in promoting financial inclusion in India over the past decade. While the scheme has expanded banking access to millions, challenges such as account duplication, financial literacy, and the efficient utilization of banking services need to be addressed. Moving forward, ensuring that PMJDY continues to evolve and adapt to the needs of the population will be key in achieving greater financial empowerment and inclusion.