A decade of Jan DhanYojana

The Pradhan Mantri Jan-DhanYojana (PMJDY), the national mission for financial inclusion, has successfully completed 10 years.

About Pradhan Mantri Jan-DhanYojana (PMJDY)

• The mission aims to ensure access to financial services like a basic savings and deposit account, remittance, credit, insurance, and pension in an affordable manner.
• Under the scheme, a basic savings bank deposit (BSBD) account can be opened in any bank branch or Business Correspondent (Bank Mitra) outlet. Benefits of the scheme are: 
  • There is no requirement to maintain any minimum balance in PMJDY accounts.
  • Interest is earned on the deposit in PMJDY accounts.
  • Rupay Debit card is provided to PMJDY account holder.
  • Accident insurance cover of Rs1 lakh (enhanced to Rs. 2 lakh to new PMJDY accounts opened after 28.8.2018) is available with RuPay card issued to the PMJDY account holders.
  • An overdraft (OD) facility up to Rs. 10,000 to eligible account holders is available.
  • PMJDY accounts are eligible for Direct Benefit Transfer (DBT), Pradhan Mantri Jeevan JyotiBimaYojana (PMJJBY), Pradhan Mantri Suraksha BimaYojana (PMSBY), Atal Pension Yojana (APY), Micro Units Development and Refinance Agency Bank (MUDRA) scheme.

Has it achieved ‘financial inclusion’?

• JAM Trinity: The Indian government has focused on Digital Public Infrastructure, leveraging the JAM trinity—Aadhaar cards, mobile penetration, and Jan Dhan accounts. This approach has elevated the financial inclusion rate from 25% in 2008 to over 80% of adults in the last 6 years.
• Foundation for Economic Initiatives: PMJDY has served as a foundation for various people-centric economic initiatives, including direct benefit transfers, COVID-19 financial assistance, PM-KISAN, increased wages under MGNREGA, and expanded life and health insurance coverage.
• Social Impact: A 2021 SBI report noted that states with higher PMJDY account balances experienced a drop in crime rates and reduced alcohol and tobacco consumption, indicating the program’s positive social impact.
• Achieving Financial Inclusion Goals: In 2023, a G20 report by the World Bank confirmed that India achieved its financial inclusion goals within just 6 years—a feat that would have taken 47 years without its advanced Digital Public Infrastructure.
• Global Comparisons and Metrics: According to the SBI report of 2021, India has surpassed China in financial inclusion metrics.

India's Efforts Towards Financial Inclusion

• Banking Accessibility

India's journey toward financial inclusion began with significant milestones. The government, alongside institutions like the Reserve Bank of India (RBI) and the National Bank for Agriculture and Rural Development (NABARD), has made numerous efforts to enhance banking accessibility:

• 1969 & 1980: The nationalization of 20 private sector banks aimed to improve banking penetration, especially in rural areas.
• 1972: Introduction of priority sector lending to extend credit on favorable terms to agriculture and small industries.
• 2006: Introduction of business correspondents by the RBI to reach underserved areas.

Despite these efforts, by 2008, nearly half of India's population still lacked a bank account, as highlighted by an extensive study under the Chairmanship of C. Rangarajan, former Governor of RBI.

• Digital Public Infrastructure (DPI)
• In August 2014, financial inclusion received a major boost with the launch of the Pradhan Mantri Jan DhanYojana (PMJDY). This initiative, supported by Digital Public Infrastructure (DPI), transformed financial inclusion through:
  • Aadhaar: Providing biometric and portable identity.
  • Mobile Phones with Internet: Granting Jan Dhan account holders access to basic banking services.
• The integration of Jan Dhan, Aadhaar, and mobile (JAM) significantly improved banking penetration. As of August 14, 2024:
  • Total Accounts Opened: 53.1 crore
  • Rural and Semi-Urban Accounts: 35.4 crore
  • Female Beneficiaries: 29.6 crore
  • Total Deposits Mobilised: ?2.31 trillion

Impact and Achievements

• Household Banking: Nearly 100% of households are now connected with formal banking institutions.
• Financial Inclusion Index (FI-Index): The index improved from 60.1 in March 2023 to 64.2 in March 2024. This composite index, published by the RBI, measures various aspects of financial inclusion, including:
  • Ease of Access (35% weight)
  • Availability and Usage (45% weight)
  • Quality of Services (20% weight)

PYQ

Q1:  Is inclusive growth possible under market economy? State the significance of financial inclusion in achieving economic growth in India. (2022)

Q2: Pradhan Mantri Jan-DhanYojana (PMJDY) is necessary for bringing unbanked to the institutional fiancé fold. Do you agree with this for financial inclusion of the poorer section of the Indian society? Give arguments to justify your opinion. (2016)