Ten Years of Pradhan Mantri Jan-Dhan Yojana | 28 Aug 2024

Source: BS

Why in News?

The year 2024 marks the tenth year of the Pradhan Mantri Jan-Dhan Yojana (PMJDY). PMJDY was launched ten years ago on 28th August, 2014.

• The government aims to open more than 3 crore accounts under the PMJDY during the current financial year 2024-25.

What are the Achievements of Pradhan Mantri Jan-Dhan Yojana? 

• Account Expansion: PMJDY has moved from the modest beginning with 147 million accounts opened in March 2015 to a mammoth 520 million accounts in March 2024.
• Deposit Mobilisation: The deposit mobilisation was Rs 15,600 crore in March 2015 which increased to Rs 2.32 trillion in March 2024. 
  • The deposit mobilisation grew at a compound average growth rate of 30% over the last 10 years.
  • Average balance increased from Rs 1,065 in March 2015 to Rs 4,476 in March 2024, nearly quadrupling in the last decade.
• Expansion of Banking Infrastructure: Over 1.3 million banking touch points have been mapped on the  Jan Dhan Darshak (JDD) App. 
  • A total of 601,000 villages are mapped on the JDD app as of July 2023. Out of these, 599,468 (99.7%) of total mapped villages are covered with banking outlets (bank branch, banking corner, or Indian Post Payment Banks within 5 km radius).
  • The Jan Dhan Darshak App is a mobile application that helps citizens locate banking touchpoints like branches, ATMs, Banking Correspondents (BCs), IPPBs etc.
• Rural-Urban Parity: As per Ministry of Finance, PMJDY achieved a milestone of a total of 53.13 crores PMJDY accounts out of which 55.6% (29.56 crores) Jan-Dhan account holders are women and 66.6% (35.37 crores) Jan Dhan accounts are in rural and semi-urban areas.
• Boost in Digital Payments: The total number of UPI financial transactions have increased from 920 million in Financial Year (FY) 2018 to 131.2 billion in FY 2024. 
  • Similarly, total number of RuPay card transactions at  point of sale (PoS) and e-commerce have increased from 670 million in FY 2018 to 1.26 billion in FY 2023.
• Direct Benefit Transfer (DBT): PMJDY transferred about USD 361 billion directly to beneficiaries from 53 central government ministries through 312 key schemes.
  • During Covid-19, the PMJDY accounts were instrumental in one-time ex gratia payment of Rs 500 per month for three months (April, May and June 2020) under Pradhan Mantri Garib Kalyan Yojana (PMGKY), benefiting 206.4 million women account holders..
• Overdraft (OD) Accounts: As of March 2024, a total of 1,17,701 overdraft facility have been opened with a sanctioned amount of Rs 190 crore to such PMJDY account holders. The limit utilisation stands at 80.5%.
  • It has ensured access to credit from the formal financial system for the poorest of the poor. 
• Low Zero Balance Accounts: Although zero balance accounts are permitted under PMJDY and maintenance of minimum balance is not mandatory, only 8.4% accounts have zero balance.
• Praised by the World Bank: As per the World Bank, India has achieved as much in just six years what would have taken about five decades. 
  • The Jan Dhan-Aadhaar-Mobile (JAM) trinity has propelled the financial inclusion rate to 80% of adults from 25% in 2008, a journey shortened by up to 47 years and made possible due to Digital Public Infrastructure (DPI).

What is PMJDY?

• PMJDY is a financial inclusion program that aims to ensure access to financial services, namely, basic savings & deposit accounts, remittance, credit, insurance, pension in an affordable manner. 
• Under the scheme, a basic savings bank deposit (BSBD) account can be opened in any bank branch or Business Correspondent (Bank Mitra) outlet, by persons not having any other account.
• Features:
  • No Minimum Balance: There is no requirement to maintain any minimum balance in PMJDY accounts.
  • Free Debit Card: Free Rupay Debit card is provided to PMJDY account holders.
  • Accident Insurance: Accident Insurance Cover of Rs.1 lakh (enhanced to Rs. 2 lakh to new PMJDY accounts opened since 2018 is available with RuPay card issued to the PMJDY account holders.
  • OD Facility: An overdraft (OD) facility up to Rs. 10,000 to eligible account holders is available.
  • DBT Benefits: PMJDY accounts are eligible for DBT, Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY), Atal Pension Yojana (APY), Micro Units Development & Refinance Agency Bank (MUDRA) scheme.
  • However, there is no mandatory free cheque book facility with a PMJDY account. Banks can issue cheque books on PMJDY accounts which may/may not be priced.

What are the Challenges Associated with PMJDY?

• Multiple Accounts: The lure of getting a large insurance cover, accidental death benefit cover and overdraft facility prompt people to open multiple accounts in different banks using different identification documents like Aadhaar card, PAN card etc.
• Economic Burden on Banks: Too many accounts with persistent low balance creates  financial problems for banks in managing them.
• Money Laundering: There are concerns that Jan Dhan accounts owned by the poor are used in money laundering by black money operators.

  • Jan Dhan accounts were used to launder money after demonetisation.

• Declining Overdraft facility: Providing OD facility is the discretion of the concerned banks. Many banks decline to extend the OD facility therefore defeating the purpose.
• Misusing Authority: Sometimes Business correspondents (BCs)  misuse the authority and make the life of people below poverty line miserable.
  • BCs may charge extra fees for services that are supposed to be free or have minimal costs, such as opening bank accounts, processing transactions, or providing loans. 
• Bad Loans: It is a possibility that the overdraft facility could end up as bad loans for banks as the scheme does not spell out how the banks can collect debts.
  • With many debt waivers in the past, people may end up treating the loans as freebies.
• Financial and Technology Illiteracy: There is a lack of awareness, knowledge and skills among rural people to make informed decisions about savings, borrowings, investments and expenditure.
  •  A survey conducted by financial services giant Visa revealed that 65% of Indians lack financial literacy.

Way Forward

• Centralised Verification System: Implement a centralised system to prevent duplication of accounts using biometric and digital identity verification. 
  • Develop incentives for individuals to maintain a single account rather than multiple ones, such as enhanced benefits or reduced fees.
• National Strategy for Financial Inclusion (NSFI): The upcoming NFSI for 2025-30 should emphasise PMJDY to expand social security scheme penetration and their awareness among the targeted population.
• Insurance for All: India needs to move away from sole focus on accounts and balances.
  • Endeavour is needed to ensure coverage of PMJDY account holders under Micro Insurance schemes. 
  • Improving access of PMJDY account holders to micro-credit and micro investment such as flexi-recurring deposit is needed.
• Increased Penetration of OD accounts: The penetration of OD accounts must be improved so that PMJDY becomes a catalyst for a virtuous cycle of growth and contribution towards Viksit Bharat. 
• New Focus Areas: The Centre believes that PMJDY has covered the majority of the adult population. Now, our focus is to cover the entire adult population and continue to cover those acquiring adulthood.