Pradhan Mantri Jan Dhan Yojana is a much-lauded scheme of Narendra Modi government which aims to enhance the scope of financial inclusion and banking services to the citizens of the nation. It is also known as the National mission on financial inclusion.
The scheme, hailed as one of the largest financial inclusion programs in the world was announced by Prime Minister Narendra Modi on 15 August 2014. The program was officially launched on 28 August for four years till 28 August 2018 but was later extended.
Department of Financial Services is administering the scheme. The present Finance Minister is Nirmala Sitharaman.
For the official site of Jan Dhan Yojana, visit Pradhan Mantri Jan Dhan Yojana.
To look at the other achievements of the Pradhan Mantri schemes, click here.
The slogan of the Scheme is “Mera Khatha, Bhagya Vidhatha“. It is available to 10 to 65 years of age group. The Scheme is being run by the Department of Financial Services, Ministry of Finance. The scheme originally targeted to cover “every household” within its banking network, however, now in the second phase, the target has been revised to include “every adult” within the formal system.
The concern for financial inclusion started when India began its journey as a welfare state in the post-Independence era. Prime Minister Indira Gandhi further boosted the concept with her decision to nationalize 14 banks in 1969. It was speculated that the banks will be able to provide last-mile connectivity to the unbanked population. But it gradually turned into a half success.
Therefore, the government came out with this PMJDY scheme to install a framework of financial inclusion that incentivizes people to move into the formal credit system. Provision of Zero balance account and facilities such as Rupay cards have been quite a popular boost for the lower class people.
Objectives of PM Jan Dhan Yojana
- To cover all households in the country with banking facilities, and opening a bank account for each household.
- To provide an integrated framework of formal credit to the citizens.
- To ensure the transfer of subsidies through the Direct Benefit Transfer (DBT) mode in a single place.
- To offer various kinds of banking services like the basic savings bank account, remittances facility, insurance, and pension to the unbanked population.
- To expand the net of financial security for the population.
- To promote financial inclusion within the nation.
- To provide micro-insurance facilities to the people.
- To create a Credit Guarantee Fund to cover the defaults in overdraft accounts.
- To establish a direct connection between the government and the unbanked population, thus eliminating the need for money-lenders and middle-men.
- To promote the habit of saving among individuals.
- To embark on a journey of financial literacy program to let people know about the financial services being offered by the country’s banking system.
- To provide the banking services banking outlets within 5 KM distance of every village.
- To ensure the accessibility of financial products at an affordable cost.
- To inculcate financial technology into the banking system by roping in e e-KYC, IMPS, AEPS.
The 6 Pillars of the Scheme have been identified as below-
Detailed Provision and Benefits of Pradhan Mantri Jan Dhan Yojana
The accounts opened under Jan Dhan scheme do not require a mandatory requirement to maintain a minimum amount in the account. Moreover, after remaining active for 6 months, one can enjoy the overdraft facility of Rs. 5,000.
A person not having valid documents can also open their accounts. These Jan Dhan Yojana accounts will be termed as “Small accounts“. This type of account will be regularised within one year. The KYC norms have been relaxed for this scheme.
The account is useful to ensure the smooth implementation of the Direct Benefit Transfer mechanism as it is directly transferred to the beneficiary’s account.
Accidental Insurance Cover of Rs. 1 Lakh plus a life cover of Rs.30,000 will be payable on the death of the beneficiary.
The facility of Ru-pay Card is made available to the beneficiaries of the account.
Revisions in the Jan Dhan Yojana Scheme
Owing to the massive success of the scheme, the Union government has decided to extend the scheme’s execution beyond 28 August 2018. Now the focus has been shifted from covering “every household” to “every adult individual”. In September 2018, the following changes were done in the scheme.
- Over-Draft limit of Rs. 5,000 revised has been now extended to Rs. 10,000. It is available in only one account per household, preferably a woman of the household.
- Age limit for availing OD facility revised from 18-60 years to 18-65 years.
- The accidental insurance cover for new RuPay card holders raised from existing Rs.1 lakh to Rs. 2 lakh to new PMJDY accounts.
- Creation of Credit Guarantee Fund for coverage of defaults in overdraft accounts.
Guinness Book of World Record has appreciated the scheme’s success and certified- “Most bank accounts opened in one week as part of the Financial Inclusion Campaign is 18,096,130 and was achieved by the Department of Financial Services, Government of India.”
Official figures of PMJDY
As per the government’s official data, so far 37.19 Crore beneficiaries have been added to the banking network under this scheme. Rs. 104,698.00 Crore Balance has been transferred in the beneficiary accounts
Fact-Check of PM Jan Dhan Scheme
According to the Global Findex Database 2017 released by World Bank, more than 80% of Indian adults have a bank account which is celebrated as a success of Jan Dhan Yojana. However, the report findings also tell that 48% of these account-holders made no withdrawal or deposit in the past one year. Therefore the claims of active banking transaction by the government seems to stand contrary to the reported data.
As per the Household Survey on India’s Citizen Environment and Consumer Economy, 2016, the prevalence of access to informal credit is still very high among the poorest sections of the society. It has been reported that almost two in three individuals take credit from informal sources. In such a case, access to bank accounts because of Jan Dhan Yojana fails to transform this population into active bank users.
Reserve Bank of India‘s data furthers hows that the credit-deposit ratio for the rural population increased from 41% in 1999 to 66.9% in 2016. But the point to be noted here is that a significant proportion of this growth took place before the scheme was launched. Since 2014, it has more or less stagnated in rural areas. In fact, the figure deteriorated slightly from 58.2% in 2014 to 57.7% in 2016 for semi-urban populations. Thus the claims of formal credit under Jan Dhan Yojana seem to be a false hope.
DBT has been successful in transferring crores of subsidies over the year. In this regard, Jan Dhan Yojana has been a great facilitator to push forward the transfer of DBT story. DBT is dependent on JAM — the trio of Jan Dhan Yojana, therefore, the success of DBT relies heavily on Jan Dhan Yojana.
Till now, a total of 438 schemes implemented by 56 ministries and departments are covered by DBT. As per the official figures, the estimated savings from DBT in FY19 were Rs. 51,664.85 crores.
As of July 17, 2019, a total of 36.25 crore accounts were opened under the scheme in which Rs. 1,00,831 crore have been deposited.
The scheme by the Modi government carries a healthy aim within its fold. The task to transform the existing population into active participants of the economic cycle is very ambitious tasks that the government has put itself onto.
To sum up the impact of Jan Dhan Yojana, we can say that it is the potential tool to take India on a journey of financial inclusion. Financial inclusion is the final penance that can alleviate many of India’s socio-economic problems. Therefore, despite the contrary claims and reports, one can say certainly that if India achieves financial inclusion in true essence, its economy will transform into a much mature and stable form.
The diagram given below explains the impact of financial inclusion on commoners.