Introduction
PMJDY: Pradhan Mantri Jan Dhan Yojana was launched as the National Mission for Financial Inclusion on 28th August’ 2014. with an aim to provide a platform for universal access to banking facilities with at least one basic banking account for every household, financial literacy and access to credit, insurance and pension facilities. PMJDY covers both Urban and Rural Areas and those who open accounts are given indigenous Debit Cards which are RuPay Cards. These Accounts can be opened in any bank branch at zero Balance or with the help of Business Correspondent also known as Bank Mitr.
The Scheme was extended further beyond 14th August’ 2018 with the focus on opening accounts shifting from every household to every unbanked adult. PMJDY focuses on providing affordable financial services and products by incorporating technology for efficiency.
JAM Trinity: JAM stands for Jan dhan Yojana, Aadhar and Mobile. It is an Indian Government Initiative which aims to deal with the leakage of government subsidies by linking the Jan Dhan Accounts, Aadhar Cards and Mobile numbers of India Citizens. It is generally referred to as a tool used by the government to transfer cash benefits directly to the bank account of the intended beneficiary. JAM Trinity (as it is referred to most of the times), is considered to be a key enabler of India’s transformed and well-developed digital landscapes.
Strengths
Before the launch of PMJDY, India faced numerous challenges in achieving Financial Inclusion. Key issues included lack of coordination among stakeholders, inadequate planning and operational difficulties, such as the limited number of Business Correspondent outlets to provide financial services and huge corruption was seen on ground where only 15 paisa out of Re 1 used to reach the beneficiaries.
In the last 10 years, with the assistance of this scheme, the milestone of more than 53.14 crore Jan Dhan Accounts has been achieved. The cumulative deposits of these accounts have crossed Rs. 2.31 lakh crore, with the average deposit being Rs 4352 per account. Almost 67% of the accounts have been opened in rural or semi-urban areas and 55% of accounts have been opened by women. Even during the covid phase, this scheme was fluently functioning (FY 2020-21 and FY 2021-22). As per the data, 7 crore accounts were opened during this period. These developments significantly show the positive impact on the socio-economic welfare of the underprivileged sections of the society.
PMJDY is based on six critical features, which are:
• Universal access to banking services (banking the unbanked)
• Opening the basic savings account with an overdraft facility of Rs 10,000 as per the eligibility
• Promoting financial literacy
• Creating a formal credit line for the marginalised section of the society
• Providing micro-insurance and
• A pension scheme for the unorganised sector
The undermentioned facilities are available under PMJDY:
• One Basic Savings Bank Deposit (BSBD) account is opened for an unbanked person
• An account can be opened at any bank branch or banking outlet manned by Business Correspondent (BC)
• There is no charge for opening these accounts.
• A free RuPay debit card with built-in accident insurance covers Rs. 2 lakh (1 lakh for accounts opened before 28.8.2018) and is given to PMJDY account holders. Eligible PMJDY account holders can avail overdraft facility up to Rs.10,000
• Direct Benefit Transfer (DBT) under different Government schemes can be received by eligible beneficiaries in their Jan-Dhan accounts.
Guinness World Records has also recognized the achievements made under the Pradhan Mantri Jan Dhan Yojana. It has certified that the ‘Most bank accounts opened in one week as part of the Financial Inclusion Campaign is 1,80,96,130 and was achieved by the Department of Financial Services, Government of India.
Challenges
Pradhan Mantri Jan Dhan Yojana has made significant strides in promoting financial inclusion in India since its launch in 2014. However, several challenges continue to impact its effectiveness.
1. Account Dormancy and inactivity- Despite the high number of accounts opened, many accounts remain dormant and inactive.
e.g.- According to a report, approximately 86.3% of PMJDY accounts are operational. This basically suggests that a significant portion of accounts opened are dormant.
2. Use as mule accounts- There are concerns regarding the use of PMJDY accounts as mule accounts in fraudulent activities, such as money laundering or storage of black money.
e.g.- Reports of large sums of money being deposited in dormant PMJDY accounts raised concerns about the misuse post- demonetisation in 2016.
3. Infrastructural Issues- According to the KPMG report, the inadequacy of physical and digital infrastructure, particularly in rural areas, has hindered the ability of account holders to perform transactions.
e.g- Lack of Bank Branches or Functional ATM in villages of states such as Bihar and Uttar Pradesh.
4. Lack of Financial literacy- The lack of financial literacy among beneficiaries is a critical barrier in the effective implementation of Pradhan Mantri Jan Dhan Yojana (PMJDY).
For ex- Unawareness about overdraft facilities and insurance cover provided for beneficiaries under PMJDY.
5. Duplication of Accounts- The opening of multiple Jan Dhan accounts under different schemes complicates data management and skews the understanding of the actual number of beneficiaries.
6. Exclusion of Certain Populations- Certain marginalised groups, including tribal populations and people living in extremely remote areas, remain excluded from the scheme due to social and geographical barriers.
7. Gender Disparity- Women in some conservative rural areas are less likely to use PMJDY accounts independently due to social norms. This restricts their mobility and financial autonomy.
While PMJDY has achieved a significant milestone in Financial Inclusion, addressing challenges such as Duplicate accounts, Financial Literacy and Fraud is important for its continued success. Its impact on socio-economic progress is undeniable but ongoing monitoring and adaptation are essential to ensure its long-term effectiveness and achievement of universal financial inclusion.
Recommendations
Though the Government of India has been actively running mass awareness campaigns to educate people about the benefits of PMJDY. These campaigns have also played a pivotal role in creating awareness and driving adoption. One such Initiative is Digital India Initiative which focuses on transforming India into a digitally empowered society. Increased internet penetration and digital literacy are expected to improve the uptake of PMJDY accounts in rural areas. Another one is Financial Inclusion of Women where Recognizing the need for women’s financial inclusion, the government has launched initiatives like Mahila E-Haat and Mudra Yojana. These programs aim to provide women with access to credit, fostering financial independence. However, there is much more which could be looked at in order to penetrate PMJDY in a better manner, such as –
1. Enhancement of Financial Literacy– Implementation of widespread financial literacy campaigns, in partnership with local community leaders, NGOs, and educational institutions can promote financial literacy and better use of Jan Dhan Accounts.
2. Improvement of Banking Infrastructure- Expansion of the banking network, particularly in underserved rural and remote areas, by setting up more branches, ATMs, and digital banking touchpoints. Encouragement of the use of Business Correspondents and mobile banking units to reach remote areas, can further deepen the process of financial inclusion.
3. Regular Monitoring and Feedback Mechanism– Establishment of a system for regular monitoring and evaluation of the PMJDY’s progress, and collection of feedback from beneficiaries to identify areas for improvement is likely to ensure that the scheme adapts to changing needs.
4. Foster Public-Private Partnerships: Collaborations between governments, financial institutions, and telecom companies can accelerate financial inclusion. Public policies should encourage private sector involvement in providing mobile money services and digital payment platforms.
5. Leverage Fintech Innovations: Fintech solutions like mobile banking, digital payments, and alternative credit scoring models can cater to unbanked populations by providing low-cost, scalable financial services.
6. Tailored Financial Products: Financial institutions can offer customized products suited to the needs of low-income groups, such as microinsurance and pension schemes. E.g. PM Atal Pension Yojana.
Conclusion
Undoubtedly, PMJDY has been a game-changer for financial inclusion in India, bringing millions into the formal financial system. It has played a significant role in achieving India’s goal of financial inclusion and continuously contributing towards the vision of ‘Viksit Bharat’. During its journey, it has empowered millions, who were under-served before, while giving them a sense of pride and responsibility that now they can also contribute to the national economy and financial services. The scheme not only provides banking services at ease but also focused on promoting financial literacy and inclusion through various initiatives. With the significant number of accounts opened, PMJDY has made a remarkable impact by contributing to the economic empowerment of individuals, especially in rural and semi-urban areas. ‘
However, there’s still a long journey ahead to achieve universal financial inclusion. By addressing technological challenges, enhancing financial literacy, and refining product designs, PMJDY has the potential to transform India’s financial landscape even further, fostering further economic growth and development.
References
https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2049231
https://www.pmindia.gov.in/en/major_initiatives/pradhan-mantri-jan-dhan-yojana/
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