Recent ContextAs the Pradhan Mantri Jan Dhan Yojana (PMJDY) completed 10 years on August 28, Prime Minister Narendra Modi hailed the “momentous” achievement of the scheme that has been “paramount in boosting financial inclusion and giving dignity to crores of people, especially women, youth, and the marginalised communities”
About PMJDY
-PMJDY was launched on August 28, 2014, as a national mission for financial inclusion.
-Over the last decade, 53.13 crore Jan Dhan accounts have been opened, with 29.56 crore women beneficiaries, more than the population of the European Union, and almost the same as the population of the United States respectively.
-The foremost objective of the PMJDY was to open a Basic Savings Bank Account for unbanked individuals.
-There was no requirement to maintain any minimum balance in PMJDY accounts, and these accounts earned interest on deposits like regular accounts.
-PMJDY account-holders were given RuPay debit cards.
-An accident insurance cover of Rs 1 lakh was available with RuPay cards issued to PMJDY account holders.
The cover was enhanced to Rs 2 lakh for new PMJDY accounts opened after August 28, 2018.
-Eligible PMJDY account holders can avail overdraft (OD) facility up to Rs 10,000.
– PMJDY accounts are also eligible for Direct Benefit Transfers (DBT), Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY), Atal Pension Yojana (APY), and the Micro Units Development & Refinance Agency Bank (MUDRA) scheme.
The scheme, which is one of the components of the JAM trinity of PMJDY, Aadhaar, and mobile, has had a transformative impact on the financial and banking sectors of the economy.
1.The opening of more than half a billion bank accounts has fuelled demand for banking services, encouraging commercial banks to expand their infrastructure in recent years.
2.The rollout of payment solutions such as UPI — launched two years after the PMJDY has eased and increased banking transactions.
3.PMJDY accounts have become the bedrock of the government’s DBT architecture.
Significance of the Scheme
Promoting Equitable Growth: PMJDY fosters Financial Inclusion (FI), leading to inclusive growth through the provision of affordable financial services to low-income and disadvantaged segments of the population.
Eg.The transfer of Rs 500 to 20 crore women Jan Dhan account holders during the initial days of the pandemic.
The Jan Dhan–Aadhaar–Mobile (JAM) architecture has enabled seamless transfer of government benefits to common citizens’ accounts.
Eg.Large share of low value transactions as part of the UPI, shows the ease of the ability of low income households, to engage in formal financial transactions in their daily lives.
Formalisation of the Economy:
PMJDY has brought the savings of the poor into the formal financial system, freeing them from usurious money lenders.
Women Empowerment: Approximately 55.5% of Jan Dhan accounts belong to with 29.56 crore women beneficiaries, , promoting financial empowerment.
Challenges with the scheme
The Pradhan Mantri Jan Dhan Yojana (PMJDY) has made significant strides in promoting financial inclusion in India since its launch in 2014. However, several challenges continue to impede its effectiveness.
1.Dormant Accounts: A significant number of the accounts opened under PMJDY remain inactive or have minimal balances, limiting their impact on financial inclusion. According to a report, approx.86.3% of PMJDY accounts are operational. This suggests that a significant portion of accounts opened remain dormant.
2.Awareness and Financial Literacy: Many beneficiaries lack awareness about the benefits and usage of their accounts. Limited financial literacy hampers the effective utilization of banking services.
3.Operational Issues: Overburdened banking infrastructure, especially in rural areas, leads to delays and difficulties in account opening, service delivery, and management.
Eg. Lack of bank branches or functional ATM in villages of states like Bihar and Uttar Pradesh.
4.Banking Correspondent Model: The reliance on banking correspondents (BCs) to extend services in remote areas faces challenges such as insufficient training, inadequate remuneration, and high attrition rates among BCs.
5.Technical Challenges: Issues related to digital infrastructure, like unreliable internet connectivity and technical glitches, hinder smooth transactions and accessibility, particularly in rural areas.
6.Leakages and Mismanagement: There have been instances of mismanagement and fraud, such as multiple accounts opened for a single individual, which dilutes the intended benefits of the scheme.
7.Financial Viability for Banks: Banks incur costs to maintain zero-balance accounts under PMJDY without corresponding revenue, which can affect their willingness to actively support the scheme.
8.Inclusion of the Poorest: Despite the scheme’s reach, some of the poorest segments of society, such as migrant workers and the homeless, still struggle to access these financial services.
For ex- Low Banking penetration in the tribal regions of Chhattisgarh and Jharkhand.
These challenges indicate that while PMJDY has made significant strides towards financial inclusion, ongoing efforts are needed to address these issues for the scheme to realize its full potential.