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On 28th August 2015, our Prime Minister Mr. Narendra Modi launched across the country, the Pradhan Mantri Jan Dhan Yojana (PMJDY) as world's largest financial inclusion scheme. While this move is appreciated widely, its necessity in the current times in obvious to be questioned. We live in a country where the economic gap between different sections of the society is enormously high. According to the latest survey by Oxfam, 73% of the country's wealth is bagged by 1% of the total population. To bridge the income inequality, it’s high time to take measures that involve financial inclusion of the backward sections of society, lower income groups and vulnerable groups. For a developing country like India, this also needs to be carried out at an affordable cost. The process involves providing access to banking products such as quick account opening, credit/debit cards, etc. but also other financial services like insurance and equity products.
This idea of financial inclusion is not a new one, many initiatives have been taken earlier such as establishing regional rural banks (1975), adopting service area approach (1989), and establishing a link between self-help groups and banks. Government has also taken a huge leap of faith with its initiatives such as opening of intermediate brick and mortar structures, compulsory requirement of opening branches in villages devoid of banks, relaxed and simplified KYC norms, etc. But, the masterstroke played by the current government to address this problem is the introduction of Pradhan Mantri Jan Dhan Yojana (PMJDY).
PMJDY allows a person to open a Zero Balance account with an accidental insurance cover of Rs. 1,00,000 and medical insurance up to Rs. 30,000. All account holders will get a Rupay card so that they can withdraw money with ease and can have an overdraft amount of Rs. 5000.
Apart from PMJDY, pillars of National Mission on Financial Inclusion are - Universal Access to Banking facilities, providing Bank account, overdraft, RuPay debit card, Financial Literacy Programme, Micro Credit - Funding the unfunded Micro Insurance, Unorganised Sector Pension Scheme. Let’s talk about the progress so far, in terms of numbers.
All 6 lakh villages of India have been mapped into 1.59 lakh sub-service area to have at least one fixed point banking outlet to cater to 1000 - 1500 households. 2
Total number of beneficiaries banked so far is 32.25 crores. 2
Considering Indian population of 1.2B , almost 25% of the population is financially inclusive.2
Increase in no. of bank accounts to 80% in 2017 as compared to 47% in 2014. 2
The data above states the effectiveness of PMJDY on the national front. Prima facie, the numbers definitely seem impressive but fail to convey the complete truth. 48% of those who have a bank account neither made any deposit or any withdrawal in the last one year. This directly shows that half of the bank accounts are redundant and are unnecessarily increasing the burden on government banks. Total ₹80,674.82 Crore Balance is transferred in beneficiary accounts. If we divide this figure by total number of accounts, we’ll find that it averages out to approximately Rs. 2000 per account. 1 This abysmally small number proves that people are still sceptical about the banks and aren’t able to trust the policy.
Ironically, the policy that was meant to financially include the weaker sections of the society, became a means for the rich to channelise their income. In response to an RTI, 12 Public sector banks revealed that around 80 Lakh dormant accounts became active soon after the Prime Minister made an announcement about demonetisation on Nov 8, 2016.
These findings are enough to make anyone cringe. It makes one question the viability of the entire JAM trinity which includes Aadhar and mobile linkage, along with Jan Dhan Yojana. The JAM trinity definitely increases the ease of living by providing OTP based Aadhar Verification for all Govt. programs, Aadhar Enabled Payment System (AEPS) and facilitating EKYC. But is sure to be misused by the richer sections of the society, by getting their work done through the accounts of people who work under them, just like the PMJDY.
As part of the JAM trinity, the upper sections of the society, that can survive without government aid, would be devoid of any kind of subsidies on goods and services. When things are banned, they do not stop, but rather become underground. After demonetisation, the rich channelised their black money through the bank accounts of poors, similarly it’s safe to assume that eventually people would find ways to get those subsidies through the weaker sections, which would further lead to their exploitation rather than financial inclusion. If a scheme is made to uplift the poorer sections, it should be ensured that they are able to take its advantage and are on its receiving end.
The government is surely doing a commendable job in a wide variety of areas, which is responsible for India’s fast paced development. But, at the same time, it has also witnessed major setbacks with the failure of Jan Dhan Yojana and Demonetization. There has to be some justification behind keeping dormant bank accounts and managing them. It’s high time to question how important it is to invest money in such schemes, when we have major problems like poverty, illiteracy, women and child abuse, etc. waiting to be resolved.
Due to high illiteracy, and lack of functional knowledge of gadgets, the poorer sections have not been able to use the scheme optimally. They require assistance from the educated class, and are often misled into doing things that would ultimately favor the rich. Therefore, before Jan Dhan or any other digital scheme is made mandatory for everyone, the government needs to ensure digital literacy among the people, for whom these policies are made in the first place. It would again be difficult to ensure digital literacy in a country having a mere 74% literacy rate. A scheme that pledges to ensure literacy among everyone, should be the need of the hour, if the government aims to make the digital inclusion scheme successful in the near future. A teach India campaign should proceed a Digital India campaign.
Data Reference:
1) http://niti.gov.in/writereaddata/files/Department-of-Financial-Services.pdf
2) https://pmjdy.gov.in/
By:
Pranshul Jain
Rajat Bhargava
Satweek Nayak
Shivani Nalkar
Shubham Agarwal
Udita Kaushik
This idea of financial inclusion is not a new one, many initiatives have been taken earlier such as establishing regional rural banks (1975), adopting service area approach (1989), and establishing a link between self-help groups and banks. Government has also taken a huge leap of faith with its initiatives such as opening of intermediate brick and mortar structures, compulsory requirement of opening branches in villages devoid of banks, relaxed and simplified KYC norms, etc. But, the masterstroke played by the current government to address this problem is the introduction of Pradhan Mantri Jan Dhan Yojana (PMJDY).
PMJDY allows a person to open a Zero Balance account with an accidental insurance cover of Rs. 1,00,000 and medical insurance up to Rs. 30,000. All account holders will get a Rupay card so that they can withdraw money with ease and can have an overdraft amount of Rs. 5000.
Apart from PMJDY, pillars of National Mission on Financial Inclusion are - Universal Access to Banking facilities, providing Bank account, overdraft, RuPay debit card, Financial Literacy Programme, Micro Credit - Funding the unfunded Micro Insurance, Unorganised Sector Pension Scheme. Let’s talk about the progress so far, in terms of numbers.
All 6 lakh villages of India have been mapped into 1.59 lakh sub-service area to have at least one fixed point banking outlet to cater to 1000 - 1500 households. 2
Total number of beneficiaries banked so far is 32.25 crores. 2
Considering Indian population of 1.2B , almost 25% of the population is financially inclusive.2
Increase in no. of bank accounts to 80% in 2017 as compared to 47% in 2014. 2
The data above states the effectiveness of PMJDY on the national front. Prima facie, the numbers definitely seem impressive but fail to convey the complete truth. 48% of those who have a bank account neither made any deposit or any withdrawal in the last one year. This directly shows that half of the bank accounts are redundant and are unnecessarily increasing the burden on government banks. Total ₹80,674.82 Crore Balance is transferred in beneficiary accounts. If we divide this figure by total number of accounts, we’ll find that it averages out to approximately Rs. 2000 per account. 1 This abysmally small number proves that people are still sceptical about the banks and aren’t able to trust the policy.
Ironically, the policy that was meant to financially include the weaker sections of the society, became a means for the rich to channelise their income. In response to an RTI, 12 Public sector banks revealed that around 80 Lakh dormant accounts became active soon after the Prime Minister made an announcement about demonetisation on Nov 8, 2016.
These findings are enough to make anyone cringe. It makes one question the viability of the entire JAM trinity which includes Aadhar and mobile linkage, along with Jan Dhan Yojana. The JAM trinity definitely increases the ease of living by providing OTP based Aadhar Verification for all Govt. programs, Aadhar Enabled Payment System (AEPS) and facilitating EKYC. But is sure to be misused by the richer sections of the society, by getting their work done through the accounts of people who work under them, just like the PMJDY.
As part of the JAM trinity, the upper sections of the society, that can survive without government aid, would be devoid of any kind of subsidies on goods and services. When things are banned, they do not stop, but rather become underground. After demonetisation, the rich channelised their black money through the bank accounts of poors, similarly it’s safe to assume that eventually people would find ways to get those subsidies through the weaker sections, which would further lead to their exploitation rather than financial inclusion. If a scheme is made to uplift the poorer sections, it should be ensured that they are able to take its advantage and are on its receiving end.
The government is surely doing a commendable job in a wide variety of areas, which is responsible for India’s fast paced development. But, at the same time, it has also witnessed major setbacks with the failure of Jan Dhan Yojana and Demonetization. There has to be some justification behind keeping dormant bank accounts and managing them. It’s high time to question how important it is to invest money in such schemes, when we have major problems like poverty, illiteracy, women and child abuse, etc. waiting to be resolved.
Due to high illiteracy, and lack of functional knowledge of gadgets, the poorer sections have not been able to use the scheme optimally. They require assistance from the educated class, and are often misled into doing things that would ultimately favor the rich. Therefore, before Jan Dhan or any other digital scheme is made mandatory for everyone, the government needs to ensure digital literacy among the people, for whom these policies are made in the first place. It would again be difficult to ensure digital literacy in a country having a mere 74% literacy rate. A scheme that pledges to ensure literacy among everyone, should be the need of the hour, if the government aims to make the digital inclusion scheme successful in the near future. A teach India campaign should proceed a Digital India campaign.
Data Reference:
1) http://niti.gov.in/writereaddata/files/Department-of-Financial-Services.pdf
2) https://pmjdy.gov.in/
By:
Pranshul Jain
Rajat Bhargava
Satweek Nayak
Shivani Nalkar
Shubham Agarwal
Udita Kaushik
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