JanDhan Yojana: Bringing unbanked to bank; no small feat this

Nine years ago, newly elected Prime Minister Narendra Modi gave an unusual clarion call to the poor of the country – go to nearest bank and open an account, no deposit required, no balance necessary.

Just on the very first day, a whopping 15 million opened the bank accounts, the ones who never had money to start one. Overnight, they became beneficiaries of access to financial services such as bank accounts, remittances, credit, insurance and pensions – a privilege only people with some money to open account had.

Financial inclusion of the poor to this scale and sweep was never witnessed before, not just in India, but anywhere in the world.

Today, nine years after the Pradhan Mantri Jan Dhan Yojana (PMJDY) was launched on 28 August 2014, the number of Jan Dhan account holders have jumped from 15 million to 50 million. Number of Jan Dhan deposits rose from Rs. 15,670 crore to Rs. 2,03,505 crore.

This is proverbial drop by drop filling of the ocean. Credit of this flash “wealth creation” goes to the people who had no money in the pocket and lived under grinding poverty. Amazing turnaround of fortunes!

“Never before would insurance companies have issued 1.5 crore accident insurance policies in a single day. Never before in economic history would 1.5 crore bank accounts have been opened in a single day. Never before has the Government of India organized a programme of such scale – over 77,000 locations – with the participation of so many Chief Ministers, Union Ministers, Government and bank officials.” Modi said on the Day 1 of launch, visibly overwhelmed by the numbers that responded to the call.

Jan Dhan was not just a bank account, it included an RuPay debit card, Rs 1 lakh accident insurance cover, and an additional Rs. 30,000 life insurance cover for those opening bank accounts before January 26th, 2015. And there was an overdraft facility, too.

Figures continue to amaze. Among 50 crore account holder in the formal banking system today, approximately 55.5% belong to women, and 67% have been opened in rural and semi-urban areas. As many as 34 crore RuPay cards have been issued to Jan Dhan accounts without any charge. The card also provides for Rs. 2 lakh accident insurance cover.

Indeed, the PMJDY scheme has ended the “financial untouchability” by onboarding the marginalised sections of the society into the formal banking.

By providing access to underprivileged sections of the society to everyday banking, credit, insurance and pension coverage,  creating financial awareness, the outcomes are far reaching and have a multiplier effect on the economy.

Moreover, Jan Dhan–Aadhaar–Mobile (JAM) architecture has enabled direct transfer of Government benefits (Direct Benefit Transfer DBT) in the accounts and has kicked out the monster of middleman forever from the life of poor man. Arguably, the poor man has also slipped out of clutches of the money-lenders and he turns to his bank in time of need.

The vision of Jan Dhan comprised several prongs such as: universal access to banking services , Savings Account with overdraft facility up to  Rs. 10,000, accident cover up to Rs. 1,00,000, thrust on financial literacy like how to use ATMs, understanding credit, insurance, pensions, using basic mobile phones for transactions; and provide the banks some guarantee against defaults..

Jan Dhan is on the roll, no doubt, but momentum needs to be maintained to cover the last mile and reach the last man. Much of India’s economy owes to a very large unorganized sector. Benefit of pension must reach those all as well.

Efforts should be made to ensure coverage of Jan Dhan account holders under micro insurance schemes. Eligible PMJDY account holders are expected to be covered under similar life insurance and accident insurance schemes. Banks have already been informed of the same.

Digital payments by the common man through RuPay debit card need to be promoted by creating acceptance infrastructure across the country. There is also need to improve access of PMJDY account holders to micro-credit and micro-investment such as flexi-recurring deposits.