More Jan Dhan a/cs opened before note ban than after

‘Demonetisation has helped transform India into a nation that now uses formal banking channels as against cash’ is a narrative that the government would like to communicate.

There is a grain of truth in it but not much more. There had been a gradual movement towards using banking channels even before demonetisation, particularly in the period following the introduction of the Pradhan Mantri Jan Dhan Yojana (PMJDY) in August 2014.

More bank accounts under PMJDY were opened in the two years preceding demonetisation than after (see table). Compared to the previous years, the increase in the number of accounts was almost equal in rural/semi-urban and urban/metro branches post demonetisation.

Of the five crore new accounts post-demonetisation, a little above half came from rural and semi-urban centres and the remaining from urban and metro centres.

Prior to demonetisation, PMJDY accounts grew more in rural and semi-urban centres than in urban and metro centres.

Deposits in the PMJDY accounts also did go up during all the three years, reflecting an improvement in banking habits of the hitherto excluded population.

This growth was speeded up after demonetisation. It took 14 months for PMJDY accounts to touch a total deposit base of ₹26,800 crore.

However, demonetisation helped speed up the growth by ₹28,900 crore in a month’s time. The deposits reached an all-time high of ₹74,609 crore on December 7.

The share of RuPay cards issued to PMJDY accounts has remained at three-fourths of the total accounts.

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