The Pradhan Mantri Jan Dhan Yojna (PMJDY) is the flagship financial inclusion plan of the Modi-led NDA Government. The scheme was launched by Prime Minister Narendra Modi on August 28 this year. The basic purpose of the scheme is to bring all Indians into a network of financial inclusion, by ensuring every household has a bank account. The bank account also makes it easy for the Government to disburse welfare benefits to the deprived in foolproof transactions aided by modern technology that helps to get rid of middlemen and crony contractors who have been swindling much of public money for quite long in nexus with politicians and Government employees.
The scheme also attempts to provide the account holders with some of the basic financial facilities such as access to the RuPay debit card and accident insurance cover. Accounts opened in the first Phase (till January 26, 2015) of the scheme shall also be provided with a life insurance cover. The Pradhan Mantri Jan Dhan Yojna is deemed to be the first of many economic schemes that the NDA Government intends to roll out in order to enable a level of social security for the grass roots.
Target likely to be doubled to 15 crore
On the day of the scheme’s launch about 1.5 crore accounts were opened in various banks across the country – a record of sorts was set by the scheme. In our previous PMJDY update we had reported that about 6.47 crore bank accounts had been opened under the scheme by October 22, 2014. The latest Finance Ministry statement said, “As on 10 November, 2014, 7.24 crore accounts have been opened under PMJDY, of which 4.29 crore are in rural and 2.95 crore are in urban areas”. The Finance Ministry had set a target of creating 7.5 crore new bank accounts across the country by January 26, 2015. This target is close to being achieved within two months of the scheme’s launch. The Finance Ministry is now considering a major revision in the set targets. These are likely to be doubled to about 15 crore new bank accounts by the Republic Day next . The final decision on this is yet to be taken. About four crore RuPay debit cards have hitherto been delivered to PMJDY bank account holders and the remaining are expecting their debit cards shortly.
Jan Dhan Yojna rollout total in many regions
Government reports reveal that the States of Goa and Kerala, the Union Territories of Puducherry, Chandigarh, Lakshadweep, and many districts of Gujarat and Madhya Pradesh have been completely covered by the PMJDY. Cent percent households in these regions now have at least one bank account. In Gujarat, the three districts that have reported 100 percent coverage are Gandhi Nagar, Mehasana and Porbandar. Ujjain district of Madhya Pradesh has also reported total coverage.
Current estimates suggest that an average of about a lakh accounts are being opened under the scheme each day. The total amount of money collected by the deposits and brought into mainstream banking is INR 4,857 crore. The Finance Ministry has asked the banks to take up extensive awareness drives to educate the masses about the benefits of opening bank accounts under the PMJDY.
Boost to banking sector
Most banks have now started to agree that the Pradhan Mantri Jan Dhan Yojna is a big boost to the country’s banking sector. Private banks, though initially apprehensive, seem to now accept that the scheme shall bring in big benefits for the banking sector in the years to come. The Yojna shall bring with it the scope for banks to sell micro-finance products to people across the country. According to Crisil, the Jan Dhan scheme is likely to make rural operations more profitable for banks. The rural operations have started to expand at an unprecedented rate since the launch of the scheme. Banks that are losing in their operations in the rural regions will turn around and become profitable, the Crisil report says. The Jan Dhan Yojna is likely to increase the economies of scale. It is likely to bring in long-term profitability.
LPG subsidy to be linked to PMJDY
Last week the Government of India modified the Direct Benefit Transfer scheme prepared by the previous Government to facilitate hassle-free disbursal of LPG subsidy direct into bank accounts especially with the PMJDY in place. The new LPG subsidy transfer scheme has been rolled out in 54 districts of 11 States and soon will cover the entire country. The launch of the PM Jan Dhan Yojna a couple of months before the launch of this scheme seems to be a well thought out move by the Finance Ministry to enable the poor households to avail themselves of the benefits of this subsidy scheme without fear of fraud.
Concern over zero transaction accounts
One of the major concerns that now haunts the Finance Ministry is that about 75% of the accounts opened under the Jan Dhan Yojna have zero balance. But the primary intent of the NDA Government in launching the PMJDY was to initiate an era of economic inclusion and put an end to “financial untouchability”. About 42 percent of the people of India had no bank accounts prior to the launch of the scheme.
Savings from these typically low income group households remained beyond the reach of mainstream banking and the new scheme has facilitated banks’ entry into the uncharted territory. But the response from the customers on the so far-excluded sections is not satisfactory. About three-quarters of the accounts that have been opened under the scheme remain dormant without any balance or transactions. This also disqualifies the account holders from availing certain dividends that have come along as a package with the PMJDY bank account. An account holder who does not perform at least one transaction on his account within 45 days shall become ineligible for the accident insurance cover on offer. Besides, the overdraft facility offered by the new accounts also depends on the savings in the accounts. A zero transaction account holder shall not be able to avail of this either. Obviously, there is a disconnect due to lack of requisite awareness or is there an underlying problem much more serious and difficult to crack?