8 Years of Pradhan Mantri Jan-Dhan Yojana (PMJDY)

In Context

• Pradhan Mantri Jan Dhan Yojana (PMJDY) – National Mission for Financial Inclusion recently completed eight years of its implementation.

About PMJDY

• About:
  • Pradhan Mantri Jan Dhan Yojana (PMJDY) is National Mission for Financial Inclusion to ensure affordability in access to financial services, namely, 
    • Banking/ Savings & Deposit Accounts, 
    • Remittance, 
    • Credit, Insurance, 
    • Pension 
• Objectives:
  • Ensure access of financial products & services at an affordable cost.
  • Use of technology to lower cost & widen reach.

• Basic tenets of the scheme:
  • Banking the unbanked:
    • Opening of basic savings bank deposit (BSBD) account with minimal paperwork, relaxed KYC, e-KYC, account opening in camp mode, zero balance & zero charges.
  • Securing the unsecured:
    • Issuance of Indigenous Debit cards for cash withdrawals & payments at merchant locations, with free accident insurance coverage of Rs. 2 lakh.
  • Funding the unfunded
    • Other financial products like micro-insurance, overdraft for consumption, micro-pension & micro-credit.

• The scheme was launched based upon the following 6 pillars:
  • Universal access to banking services.
  • Basic savings bank accounts with overdraft facility of Rs. 10,000/- to every eligible adult.
  • Financial Literacy Programme– Promoting savings, use of ATMs, getting ready for credit, availing insurance and pensions, using basic mobile phones for banking.
  • Creation of Credit Guarantee Fund – To provide banks some guarantee against defaults.
  • Insurance – Accident cover up to Rs. 1,00,000 and life cover of   Rs. 30,000 on account opened between 15 Aug 2014 to 31 January 2015.
  • Pension scheme for the Unorganised sector.

• Important approach adopted in PMJDY based on past experience:
  • Accounts opened are online accounts in the core banking system of banks, in place of earlier methods of offline accounts opening with technology lock-in with the vendor.
  • Interoperability through RuPay debit card or Aadhaar enabled Payment System (AePS).
  • Fixed-point Business Correspondents.
  • Simplified KYC / e-KYC in place of cumbersome KYC formalities.

Significance & Impact of PMJDY

• PMJDY & people-centric economic initiatives:
  • PMJDY has been the foundation stone for people-centric economic initiatives like:
    • Direct benefit transfers, 
    • COVID-19 financial assistance, 
    • PM-KISAN, increased wages under MGNREGA, 
    • Life and health insurance cover, 
  • The first step of all these initiatives is to provide every adult with a bank account, which PMJDY has nearly completed. 
• Ending the informal money lending:
  • Jandhan provides an avenue to the poor for bringing their savings into the formal financial system, an avenue to remit money to their families in villages besides taking them out of the clutches of the usurious money lenders. 
• Expansion of the financial architecture of India:
  • PMJDY has brought the unbanked into the banking system, expanded the financial architecture of India and brought financial inclusion to almost every adult.
• Direct Benefit Transfer (DBTs) & preventing systemic leakage:
  • In today’s COVID-19 times, we have witnessed the remarkable swiftness and seamlessness with which Direct Benefit Transfer (DBTs) have empowered and provided financial security to the vulnerable sections of society. 
  • An important aspect is that DBTs via PM Jan Dhan accounts have ensured every rupee reaches its intended beneficiary and preventing systemic leakage. 
  • JAM:
    • The JAM pipeline created through account holders’ consent-based linking of bank accounts with Aadhar and mobile numbers of the account holders, which is one of the important pillars of FI ecosystem has enabled instant DBT under various government welfare schemes to the eligible beneficiaries.

• Other Attainments of PMJDY
  • More than 46.25 crore beneficiaries banked under PMJDY since inception, amounting to Rs. 1,73,954 crore.
    • 31.94 crore RuPay cards are issued to PMJDY account holders
  • 56% Jan-Dhan account holders are women and 67% Jan Dhan accounts in rural and semi-urban areas.
  • One in 2 accounts opened between March 2014 to March 2020 was a PMJDY account. 
  • Within 10 days of nationwide lockdown more than about 20 crore women PMJDY accounts were credited with ex-gratia.
  • There has been a shift in focus from “every household’ to “every adult”.

Challenges 

• Jan Dhan accounts are prone to problems of zero balance, duplication and dormancy.
• The technological issues affecting banks from poor connectivity, networking and bandwidth problems to managing costs of maintain infrastructure especially in rural areas

Way ahead

• Endeavour to ensure coverage of PMJDY account holders under micro insurance schemes. 
• Eligible PMJDY account holders will be sought to be covered under PMJJBY and PMSBY. 
  • Banks have already been communicated about the same.
• Promotion of digital payments including RuPay debit card usage amongst PMJDY account holders through the creation of acceptance infrastructure across India
• Improving access of PMJDY account holders to Micro-credit and micro-investment such as Flexi-recurring deposit etc.