What is PM Jan Dhan Yojana (PMJDY)?
PMJDY wants to take banking to the masses in a country where access to banking services has been poor for decades.
PMJDY initially targeted one bank account for every household, but in 2018 that target was increased. Now, the focus has shifted from ‘every household’ to “every unbanked adult” and aims to provide all Indians with access to a range of financial services. In the form of a basic savings bank account (zero-balance), need-based credit, remittance facility, insurance and pension.
PMJDY plans to introduce comprehensive financial inclusion and provide banking services to all households in the country. Its objective is to promote financial literacy in India, to promote savings use of ATMs and mobile banking.
Among other benefits, PMJDY offers a free accident insurance cover 2 lakh on RuPay card and one overdraft facility, collected from from 5,000 10,000.
And then the JAM trinity—Jan Dhan, Aadhar and Mobile—is replacing the subsidy transfer by the government to the poor.
The government runs a massive subsidy system, but in the past benefits only reached the poor through indirect, long-lasting channels that encouraged corruption and leakages. The Public Distribution System (PDS) which provides subsidized food and the employment guarantee scheme MGNREGA are clear examples of this. Also, think about electricity and fertilizer subsidies.
Using JAM Trinity, the government has started direct subsidy transfer to bank accounts. Aadhaar allows biometric identification, and money can be sent directly to Jan Dhan bank accounts through mobile phones. MGNREGA, PM-Awas, PM-Kisan, etc. are some of the major government schemes, where Direct Benefit Transfer (DBT) is being introduced by the government, eliminating middlemen as much as possible.
The government says that around 9 million DBT transactions are being processed daily, with the money going directly into the accounts of the beneficiaries. The total subsidy is around 4% of India’s GDP.
What is the impact of PMJDY?
The PMJDY figures certainly look encouraging. Sample this recent data compiled by the center
PMJDY accounts have tripled, from 147.2 million in March 2015 to 462.5 million in August 2022. About 80% of the accounts are current, and women have about 56% of the accounts (310 million). Total deposits have increased by 7.6 times 1.73 trillion between August 2015 and August 2022. And the average deposit has climbed three times 3,761 per account.
On top of all that, only 8.2% of accounts are zero-balance accounts, a sharp decline in recent years. In September 2014, the figure stood at 76%, but the zero-balance account figure has been falling steadily since then.
Now, a reality check. Undoubtedly, while Jan Dhan has given millions of Indians access to a banking account, it still hasn’t helped many build a better future for themselves, as World Bank figures tell us.
Analysts say that most Indians still find it difficult to get bank loans. Poor financial literacy means that many Indians are unaware of the potential benefits of owning a bank account. This is evident from the extremely limited number of people who use 10,000 overdraft facility given to them by the government – till last year this figure was less than 1% of PMJDY account holders. Even small loans given by banks to the underprivileged can trigger the micro-finance revolution. This has been demonstrated in other countries including Bangladesh, where Muhammad Yunus and Grameen Bank planted the seeds of the microcredit revolution.
Also, most of the Jan Dhan customers are poor and have very little savings. Most banks find it unprofitable to complete them. Many Indians still approach local moneylenders for loans at exorbitant interest rates, defeating the purpose of access to the formal banking system.
Furthermore, while the number of operating accounts is increasing and there has been a sharp decline in zero-balance accounts, this does not necessarily reflect greater financial inclusion. Analysts say savings in active bank accounts could be a result of Direct Benefit Transfer (DBT) by the government to them.
Recent World Bank figures also point to these trends. In its recent Global Findex Database 2021, the World Bank says that nearly a third of account owners in India had inactive accounts in the past year.
And while, globally, the 1 billion adults who have an account did not make any digital payments, more than half of these, 540 million, were in India, it says.
The World Bank in its study said that account inactivity in India was a result of “distance from financial institutions, lack of trust and lack of need”.
Can PMJDY empower women in India?
A few days ago, Prime Minister Modi in his August 15 speech said that “Gender equality is the key to a united India. A scheme like Jan Dhan is an opportunity for the Modi regime to take forward its agenda of women empowerment.
Studies show that women consistently save small amounts and may be encouraged to go for credit, insurance and other financial products. Already, 56 per cent of Jan Dhan account holders are women.
The World Bank in its recent report also claimed that there is substantial evidence in developing countries that access to bank accounts can “enable financial independence and strengthen economic empowerment” for women. It gives examples to build on this argument.
The World Bank notes that in the Philippines, “women who use commitment savings products that encourage regular deposits into a personal bank account have increased domestic decision-making power and reduce their spending on household items.” Moved, like washing machines.” Another study in Kenya showed that “female-dominated households spent 15% more on nutritious foods after receiving free savings accounts”, it says.
And also in India, it says that “paying women their benefits directly into their account (and not into the account of a male head of household) increased women’s financial control, bolstering gender norms preventing women from working.” influenced, and encouraged women to find employment, rather than pay in cash.”
Jan Dhan can prove to be a game changer for women empowerment in India. But it is still a lot of work in progress.
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