Financial inclusion is delivery of financial services at an affordable cost to the vast sections of the disadvantaged and low-income groups, providing them with timely and adequate access to the financial products, services like Bank Accounts, Savings Products, Remittances & Payment services, Insurance, advisory services, Entrepreneurial and Micro credit, Micro finance.

“Financial Inclusion” is the way the Governments strive to take the common man along by bringing them into the formal channel of economy thereby ensuring that even the person standing in the last is not left out from the benefits of the economic growth and is added in the mainstream economy thereby encouraging the poor person to save, safely invest in various financial products and to borrow from the formal channel when he need to borrow.

NSSO data reveal that 45.9 million farmer households in the country (51.4%), out of a total of 89.3 million households do not access credit, either from institutional or non-institutional sources. Further, despite the vast network of bank branches, only 27% of total farm households are indebted to formal sources (of which one-third also borrow from informal sources).  Thus to improve the financial inclusion in India government has launched Pradhan Mantri Jan-Dhan Yojana.

It is National Mission for Financial Inclusion to ensure access to financial services, namely, Banking/ Savings & Deposit Accounts, Remittance, Credit, Insurance, Pension in an affordable manner.

Account can be opened in any bank branch or Business Correspondent (Bank Mitr) outlet. PMJDY accounts are being opened with Zero balance. However, if the account-holder wishes to get cheque book, he/she will have to fulfill minimum balance criteria.

The mission mode objective of the PMJDY consists of 6 pillars. During the 1st year of implementation under Phase I (15th August, 2014-14th August,2015), three Pillars namely:

(1) Universal access to banking facilities

(2) Financial Literacy Programme and

(3) Providing Basic Banking Accounts with overdraft facility of Rs.5000 after six months and RuPay Debit card with inbuilt accident insurance cover of Rs 1 lakh and RuPay Kisan card, will be implemented.

Phase II, beginning from 15th August 2015 upto15th August, 2018 will address:

(1) Creation of Credit  Guarantee Fund   for coverage of defaults in overdraft  A/Cs

(2)  Micro Insurance and

(3)  Unorganized sector Pension schemes like Swalamban. 

In addition, in this phase coverage of households in hilly, tribal and difficult areas would be carried out. Moreover, this phase would focus on coverage of remaining adults in the households and students.

The implementation strategy of the plan is to utilize the existing banking infrastructure as well as expand the same to cover all households. While the existing banking network would be fully geared up to open bank accounts of the uncovered households in both rural and urban areas, the banking sector would also be expanding itself to set up an additional 50,000 Business correspondents (BCs), more than 7000 branches and more than 20000 new ATMs in the first phase .

In the past experience large number of accounts opened remained dormant, resulting in costs incurred for banks and no benefits to the beneficiaries.  The plan, therefore, proposes to channel all Government benefits (from Centre/State/Local body) to the beneficiaries to such accounts and pushing the Direct Benefits Transfer (DBT) scheme of the Union Government including restarting the DBT in LPG scheme.  MGNREGS sponsored by Ministry of Rural Development (MoRD, GoI) is also likely to be included in Direct Benefit Transfer scheme.

Impact of Jan Dhan Yojana

  • For Common Man
  1. Anyone who does not have an account will get an account in bank.
  2. Common man will get direct benefit of government subsidies.
  3. Common man will also have a financial and credit history on government records.
  4. It will be easy to get loan directly from financial institutions instead of other modes that charge heavy interest rate.
  • For Business
  1. More and more people will be doing shopping via debit cards reducing time, manpower and risk involved in managing cash transactions.
  2. More relevant data will be available to perform various analyses to create marketing plans.
  • For Government
  1. It will be a great milestone achieved after linking with Aadhaar card to make direct financial transactions, subsidies transfer and lot more.
  2. It will be easy to monitor transactions and collect financial data as more people will be using recorded mode of payments.
  • For Banking Institutions
  1. Banks will get new customers that directly means more money inflow.
  2. These customers may result in potential clients for other banking services like loans.
  3. Further, PMJDY promotes differential banking, allowing new entrants to innovate without the legacy constraints older banks might face. It was envisioned that PMJDY would account for social-security errors, alleviate the problem of asymmetric information via cashless payments, and tackle black money.

Achievements under PMJDY (as on 21st December,2016)

(i)     26.03 crore accounts have been opened under PMJDY out of which 15.86 crore accounts are in rural areas and 10.17 crore in urban areas. 

(ii)   Deposits of Rs. 71,557.90 crore has been mobilized.

(iii)  19.93 crore RuPay Debit cards have been issued under PMJDY.

(iv)  Aadhaar seeding in PMJDY accounts 14.43 crore

(v)   Zero balance accounts has been reduced to 23.86%

(vi)  Household Coverage: 99.99% households out of the 21.22 crore households surveyed have been covered under PMJDY.

 As on 23rd December, 2016, out of total requirement of 1,27,198 fixed location Bank Mitras in Sub Service Areas (SSAs), 1,26,985 Bank Mitras  have been deployed  by banks.

Overdraft (OD) in PMJDY accounts: As on 23rd December, 2016, 44.28 lakh accounts have been sanctioned OD facility  of which 23.85 lakh account-holders  have  availed  this  facility involving an amount of Rs.316.56 crore.

Insurance Claims settled

(i)     As on 23rd December, 2016, out of 1712 claims lodged, 1626 claims have been disposed off under accidental insurance cover of Rs. 1 lakh under RuPay debit card .

(ii)   As on 23rd December, 2016, out of 3936 claim lodged, 3421 claims paid under  Life Cover of Rs.30,000/- to those beneficiaries who opened their accounts for the first time from  15.08.2014 to 31.01.2015.

Challenges before Jan Dhan Yojana

JDY relies heavily on the BC model for expanding the banking network in both the rural and urban areas. One of the primary reasons behind the unsatisfactory performance of the BC model is the poor remuneration (Rs 2000-3000 per month) paid to business correspondents.

For such a meager amount, it is unfair to expect a BC to visit villages or slums at regular intervals, open new bank accounts for the poor people, process financial trans-actions, educate customers about banking services and answer all queries of the customers. Under the JDY, the BCs will get a minimum compensation of Rs.5000 per month.

There are several other important factors which act as a barrier in the delivery of banking services through the BC model. Some of these factors include

  • Inordinate delay in issuing smart cards to customers (three to six months);
  •  Limited utility of smart cards as services such as remittance are not loaded;
  • Inadequate cash handling limit given to bcs;
  • Devices not working properly due to technical problems or poor network connectivity;
  •  Lack of trust in bcs;
  • Lack of customer-centric banking products and services;
  • Poor governance and inadequate supervision of bcs;
  • Absence of a comprehensive strategy for financial education.

The expanded financial architecture will need personnel, which is lacking, and could be important supply side deficit. Banks have been advised under the PMJDY to open 200 accounts a day in each of their existing rural branches, but they are wary, as the existing infrastructure in those branches cannot handle the extra load.

Therefore, banking reach should be increased gradually and along with the capacity of banking infrastructure, so that the customer base at any time can be serviced well and the system is not pressurized at any time.

Other ambiguities and problems with the scheme and suggestions to tackle them are:

  • People may open multiple accounts using different ID proofs on the lure of getting insurance covers. Monitoring has to be done in this regard. All banks must have a centralised information sharing system so that this loophole can be countered.
  • If a bank is being set up, it must be set up at a place with road connectivity and must be situated at the heart of the villages and towns, especially at areas where trade .It is necessary that the bank also fulfills its other purposes such that it is viable as well as profitable to operate in a given area.
  • Even if it is a zero balance account, credibility of the account holder has to be checked. The Overdraft facility to the account holder may turn into a sub-standard or Non- Performing Asset for the banker. Thus, credit should be made available by the banker only after due diligence and not by just going by the scheme.
  • The financial literacy centre is to be held by the banker so as to keep customer aware of the services available and when and how to use them and to keep them updated of the new financial products available to her/him.

Apart from th above stated issues, privacy and security issues have cropped up, new light is shed on the scheme’s susceptibility to frauds, and ‘present bias’ is increasingly being examined, i.e. whether the number of bank accounts opened are actually being used. Additionally, several features of the scheme remain ambiguous. For instance, the promising overdraft facility is left to the discretion of banks, which creates prejudices as banks will avoid such situations that could potentially lead to NPAs.


Financial inclusion cannot be achieved only by meeting the target numbers. The RBI Governor, Raghuram Rajan had cautioned banks on the risks involved in just hunting for number with regard to Jan-Dhan Scheme, asking them not to compromise on core objective of the programme. ”When we roll out the scheme, we have to make sure it does not go off the track. The target is universality, not just speed and numbers.” The scheme can be a “waste” if it leads to duplication of accounts, if no transaction happens on the new accounts and if the new users get bad experiences.


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