Pradhan Mantri Jan-Dhan Yojana: Highlights, Implementation And Critical Evaluation

Pradhan Mantri Jan-Dhan Yojana: Highlights, Implementation And Critical Evaluation

Q.Discuss the highlights and implementation of the Pradhan Mantri Jan-Dhan Yojana and critically evaluate the scheme?

A. Highlights of the Pradhan Mantri Jan-Dhan Yojana


• PMJDY or Pradhan Mantri Jan-Dhan Yojana/PMJDY is a National Mission scheme for financial inclusion for providing following affordable services:
- Banking, Savings and Deposit Accounts, Remittance, Credit, Insurance, Pension
• PMJDY was launched at National, State and District Level on 28th August 2014.
• Over one crore accounts were opened on the day the scheme was launched


• Ensuring access to financial services
• Providing need based credit
• Promotion of financial inclusion for:
- Weaker sections
- Low income groups
• Use of technology for providing financial penetration
• Providing low cost banking services solutions
• Universal access to baking services
• Atleast one basic banking account for every household
• Provision of financial literacy
• Access to credit,insurance and pension facilities
• Channelising government benefits to accounts of beneficiaries
• Promotion of DBT (Direct Benefits Transfer) Scheme
• Addressing low connectivity and lack of financial inclusion

1. About Account Opening:
• Account can be opened:
- Bank Branch
- Business Correspondent/Bank Mitr outlet
• Unique feature-PMJDY accounts can be opened with zero balance
• If account holder wants cheque book, minimum balance criteria must be fulfilled

2. Highlights
• 21 crore households surveyed as part of PMJDY
• At least one account for each household in urban and rural area with RuPay Debit card
• Aim to promote financial literacy
• Bank Mitr/Banking Correspondent Agents/BCAs to promote branchless banking
• Free accident insurance and life coverage for economically weaker sections of society

B. Implementation - 2 Phases

Phase 1- 15th August 2014 onwards:

• Universal access to banking facilities for all households across the nation through:
- Bank Mitra/FIxed Point Business Correspondent
- Bank Branch

• Access to banking facilities in areas within reasonable distance except areas with infrastructure and connectivity

• Coverage of all households with minimum of one Basic Banking Account with RuPay Debit card with inbuilt accident insurance cover for INR 1 lakh

• Overdraft of INR 5000 to Adhaar enabled accounts following 6 months operation

• Financial literacy programme till village level

• Expansion of DBT under numerous Government schemes through beneficiary’s bank accounts

• Issuance of Kisan Credit Card/KCC as RuPay Kisan Card also covered under the plan

Phase 2
• Provision of micro-insurance
• Business correspondents to manage unorganised pension schemes such as Swavalamban
• Yojana monitored in Mission Mode with FM as head
• Coverage of 7.50 crore households under scheme with one account at least
• Large number of dormant accounts to be activated
• Enabling of electronic transfer of subsidies

C. Critical Evaluation of Pradhan Mantri Jan-Dhan Yojana

1. Advantages/For PMJDY

i. More Comprehensive Coverage

• PMJDY focuses on coverage of households
• Earlier schemes only focused on coverage of villages
• Yojana covers both rural and urban areas
• Earlier scheme targeted only villages with population able 2000;this means only 74000 villages of 5.92 lakh could be covered
• PMJDY to cover banking facilities in each sub-service area of 1000-1500 households with reach of at least 5 km

ii. Joint Account Facility

iii. Convenience - The RuPay Debit Card or domestic debit card issued by NPCI or National Payment Corporation of India is accepted for cash withdrawal or cashless transactions at POS

iv. Insurance Facilities

• PMJDY provides accidental insurance cover up to INR 1 lakh without charge to customer
• Life insurance cover of INR 30,000

v. Promotion of Financial Literacy

• Banks to organise mega account opening camps in rural and urban areas in coordination with District Authorities
• Special campaigns each Saturday from 8:00 am to 8:00 pm.
• Households in urban as well as rural areas get access
• Standardised financial literacy material prepared as part of vernacular languages
• Special emphasis on monitoring

vi. Digital Inclusion

• Use of connectivity to boost people’s access to banking services
• Accessing account with any type of mobile handset
• Smartphones not needed
• Balance enquiry and money transfer facilitated with normal handset too
• Banking now possible with common mobile phones

vii. Network Established

• Platform created by NPCI connecting banks and telephone operators
• Customer can access account from anywhere
• Business Correspondent can also support cash deposit and withdrawal
• Many PSU banks and leading Private Sector Banks already on network

viii. Greater Inclusion

• 11.5 bank crore accounts opened under Yojana currently
• Target of 10 crore exceeded
• 99.74% of households have bank accounts
• More than INR 9000 crore deposited in Jan Dhan accounts
• Providing banking services to the unbanked

ix. Possibility to Double ATM Network

• PMJDY may lead to doubling the network to 3 lakh machines in 2 years
• Increase in cardholder base through additional RuPay debit cards
• Credit card accepting devices new points of contact for PMJDY consumers

x. Pecuniary Gains

• Interest on deposit
• No need for minimum balance
• Easy money transfer
• Government scheme beneficiaries get DBT in accounts
• Access to Pension, Insurance Products

xi. Women Empowerment - Overdraft facility up to INR 5000 available to ladies of the household

xii. Expansion of Key Service Sectors

• Banking sector will grow
• Financial services sector will experience a resurgence
• Insurance industry will be revived through more customers

xiii. Targeted Beneficiaries with direct cash transfer

xiv. Closing the Gaps - PMJDY will close the divide in the subsidy system ensuring transparency

xv. Promoting Accountability

• PMJDY will cut chances of black money accumulation and counter correuption
• Remove influence of money lenders plus Ponzi schemes

xvi. Offer Useful Econometrics and Measures of Growth

• PMJDY will also enhance data collection and improve assessment

xvii. Core Banking Platform

• Will guard against duplication of accounts

xviii. Move to Pull Based Reforms from Push based reforms

xix. Efficient Implementation

xx. Greater Focus on Fixed Point BCAs - Effective and Structured Monitoring

xxi. Promotion of Technology
• Bank account online
• Linked to RuPay and mobile banking
• Aadhaar enabled payment system used; promotes interoperability

xxii. Good Customer Care
• Free online help
• Toll free customer care number

xxiii. Effective Monitoring Mechanism
• Mission Head-FM
• Steering Committee-Secretary FS
• Mission Director-Joint Secretary FI
• State Level Implementation Committee
• District Level Implementation Committee

xxiv. Many States Achieved 100% Coverage
• Even sensitive states like J&K have high coverage (94%)
• All States Have Above 90% Coverage

.xxv. DBT a Good Scheme

• DBT expansion covers beneficiaries of 5.4 crore with inflow of INR 17,777 crore per annum
• MGNERGS will take beneficiaries to 10 Crore with INR 33,000 crore fund flow per year

xxvi. Good Coverage of DBTL Scheme

• 15.34 crore active LPG consumers covered under DBTL by 1st January 2015
• Around INR 622 crore disbursed through DBTL scheme 1.82 crore LPG customers for I.59 crore transactions
• INR 6688 crore disbursed to 8.03 crore LPG customers till 14th January 2015
• Scope for DBTIL linked PMJDY wide

2. Against PMJDY

i. Most Accounts With Zero Balance

• Of the 115 million bank accounts opened, majority have zero balance
• Lack of operativeness a major problem
• 28% of the total accounts under the scheme are active only

ii. PSU Banks Not Benefiting

• Compared to private sector banks, PSU banks are not performing so well.
• 64% of private sector accounts have zero balance as against 71% accounts in PSU banks:

Private Vs PSU : A Comparison

- YES Bank: 89% accounts without balance
- Kotak Mahindra Bank: 77% accounts without balance
- Axis Bank: 75% accounts carry no balance
- State Bank of India: 95% zero balance accounts
- Indian Overseas Bank: 84% with zero balance accounts

iii. Difficulty in Keeping Accounts Active

• Connecting DBT to accounts may not succeed
• So far, only links with DBTL/DIrect Benefit Transfer of LPG and other government schemes

iv. Need to Incentivise Banks in Further Ways

• Accounts must be kept operational
• Possibility of commissions to be explored

v. Private Sector Participation Below Par

• 90 million of 115 million bank accounts opened by public sector banks
• 4.1 million accounts opened in private sector banks
• Private sector banks with just 3.6% of total accounts
• Remaining accounts opened by RRBs
• 5 major private sector banks account for just 0.9 million Jan Dhan accounts namely:
- ICICI, Kotak Mahindra, Yes Bank, IndusInd Bank, Karur Vaisya Bank
• PSU banks have greater penetration than private sector banks

vi. Different Scheme, Same Issues

• PMJDY no different from other schemes which aimed to provide credit to rural and urban poor on many scores:
• Question of financing insurance premium
• Viability of maintaining bank accounts
• With priority customers on the scene, zero balance account customers may be ignored

vii. Taxpayer Woes - Burden of another scheme falls on the Indian taxpayer

viii. Problem of Implementation

• Sound and efficient implementation needed
• Incentives needed for private sector banks
• Issue of viability of banking and insurance accounts

ix. Loan Retrieval

• One of the biggest lacunae in the scheme
• Borrowers from low income families, unorganised sectors of work
• Loan retrieval and collection tough
• Keeping track of loans essential yet difficult given magnitude of accounts
• Unpaid loans can damage financial system

x. Inefficiency of the System

• Universal inefficiency of the system
• Administrative bottlenecks

xi. Many Schemes Launched Before

• Universal banking not a new aim
• Many schemes for financial inclusion previously launched:
- Bank Nationalisation
- RRBs/Cooperative Banks
- No Frills Account
- Bharatiya Mahila Bank
- Swabhiman
- Swavlamban
- 25% branch rule

xii. RBI Governor’s Concerns

• Money laundering possible
• Multiple accounts opened by unscrupulous persons to gain more insurance
• Same persons can get numerous accounts in multiple banks with Aadhaar card, voter’s card etc.
• RBI moots single information sharing system for taking out multiple accounts

xiii. Free Accident Insurance Conditional

• Jan Dhan Yojana prvoides free accident insurance cover only if RuPay Debit Card used once in 45 days
• Not possible for poor low income individuals
• As NPCI paying premium, they want RuPay card to be used

xiv. Problem of BCAs

• Jan Dhan seeks division into SSA; 2% commission for BCA on each transaction
• BCAs likely to lose interest because of low commission
• RBI survey says 47% of BCAs cannot be traced
• BCAs not motivated to help the public because of poor compensation
• BCAs engaging in corrupt practices; lack of safeguards against this

xv. Problem of DBTs

Aadhaar card is already a cause for concern because:
• Many low income people do not have these cards
• UIDAI not backed by law, Aadhaar lacks universal acceptability
• Finger scan on Aadhaar has large margin of error;PMJDY may face trouble if biometric ID used for fund transfer
• Illegal immigrants may access Aadhaar and open accounts; Ministry of Home also concerned about Aadhaar cards and security issues

xvi. More Systematic Reforms Needed

• This includes:
- Payment Banks
- Wholesale Banks
- UEBA etc
- Skills Development
- Focus should be on Digital India for ensuring online transactions

xvii. Discriminatory Implementation

• What about areas with poor connectivity, Naxals?
• Inaccessible areas also denied benefits of PMJDY

D. Final Conclusion: PMJDY A Game Changer for the Economy

• Scheme effective in passing on benefits to poor persons if implemented properly and concerns addressed

• PMJDY recognised by Guinness Book of World Records for maximum accounts (18.096,130) from August 23rd to 29th 2014: Hasmukh Adhia

• Encouraging numbers:
- Of accounts opened, 60% in rural areas
- Share of Female Account Holders 51%
- RuPay Issued to more than 10 crore persons

• Accounts used for payment of wages under MNREGA scheme and LPG subsidyINR 33,000 crore routed through bank accounts for MNREGA, LPG and so on

• Issuance of card will encourage cashless transactions and prevent back money

• Overdraft will act as micro-finance and prevent loans at massive rates;discourage Ponzi schemes and financial frauds like Sahara scam

• This scheme has a lot pf potential if well implemented and monitored to address the challenges presently arising;

• Has the scope to be a “win-win” situation for bankers and customers alike, as well as the nation through eradication of financial untouchability.
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