Jan Dhan: Beyond a mere account

When the Pradhan Mantri Jan Dhan Yojana was announced in August 2014 by Prime Minister Narendra Modi, it could not be anticipated how successful a scheme it could be in respect of financial inclusion of the masses. No other effort of any previous government could yield such an astonishing rise in bank account ownership to more than 80 per cent of the total eligible population.

Heated debates are among public policy experts in respect of the objective behind announcing the scheme vis-à-vis the result achieved. Some even wanted to demean it as a route of the government for direct benefit transfers ranging from fertiliser to LPG. But this was proven wrong as the scheme has many other useful features.

On the completion of its sixth year on August 28, 2020, Jan Dhan had a total deposit of ₹1,310 billion (₹1.31 lakh crore) and an average deposit of ₹3,239.

The government now looks beyond the scheme as an enabler of benefit transfer to extend the Pradhan Mantri Jeevan Jyoti Bima Yojana and Suraksha Bima Yojana.

The Jan Dhan account-holders are to be brought under a social security cover, with the two schemes; an auto-debit of ₹330 and ₹12 annually gives separate life and accidental coverage of ₹2,00,000 for those in the age group of 18 to 50 years and 18 to 70 years, respectively.

Dormant issues

A black page in the Jan Dhan scheme was the flow of black money post demonetisation. The Jan Dhan accounts got deposits of around ₹870 billion (₹87,000 crore) in the first 45 days post-demonetisation during 2016-end, almost 20 per cent of the estimated black money reported to have been siphoned out via such accounts.

This even led the government to warn account holders of prosecution for allowing misuse of their bank accounts.

Dormancy of accounts is another issue with the jan Dhan accounts, and has been reported in the World Bank-Findex report.

But this has changed now, with government showing that the dormancy, which was 40 per cent of the accounts till March 2017, has come down to 19 per cent in January 2020.

Initial hiccups

There were also doubts on the government continuing the scheme after its second phase in August 2018. Bankers were also reported not keen on opening Jan Dhan accounts.

The scheme became a back-bencher as bank officials had turned to meet the target of the Pradhan Mantri Mudra Yojana to promote non-farm self-employment.

But the government persisted with the scheme, shifting the focus from “every unbanked household” to “every unbanked adult”. More benefits wee added.

The collateral-free overdraft limit was raised to ₹10,000 from ₹5,000, no condition being attached for those with active Jan Dhan accounts to get an overdraft of ₹2,000. The age limit was revised from 18-60 years to 18-65 years.

Back in limelight

Jan Dhan came into its own when the Covid pandemic locked down the entire nation. In March, the government announced monthly transfer of ₹500 into women’s Jan Dhan accounts for the next three months under the Pradhan Mantri Garib Kalyan Yojana (PMGKY). On June 30, in an address to the nation, the Prime Minister claimed that ₹310 billion (₹31,000 crore) was transferred to the Jan Dhan accounts of over 200 million (20 crore) poor families under the PMGKY.

But critics argued against the government policy to transfer the subsidy only to Jan Dhan accounts on the ground that many poor households still did not have an active Jan Dhan account.

According to a Yale study, published in April, less than half of poor adult women have a Jan Dhan account and only 21 per cent know that they have an account.

Likewise, a Dalberg study, reported also in April, finds that the proportion of poor households where at least one adult woman has a Jan Dhan account is just 57 per cent.

Even the government’s own data show that women hold 205 million Jan Dhan accounts as of April 2020, whereas over 326 million women live below the poverty line.

Thus, critics of Jan Dhan favour the National Rural Employment Guarantee Act (NREGA) job-card because of its accuracy and inclusiveness of data of poor households.

According to the Economic Survey of 2014-15, JAM (Jan Dhan-Mobile-Aadhaar) was to be the preferred mode of benefit transfers to the people. The government wanted this protocol even for a regular bank account. But this floundered partially due to a verdict of the Supreme Court.

Rather than bank accounts, many experts, including Nobel laureate Abhijit V Banerjee, feel that during crisis times such as the Covid pandemic, best is cash-on-hand for relief payments. States such as Andhra Pradesh, Odisha and Tamil Nadu have resorted to just this.

Amid all this, the Jan Dhan scheme has worked to a large extent, especially for benefit transfer. And, the government is taking the Jan Dhan story beyond financial inclusion bringing in features for the present extraordinary situation.

The writer is Professor of Commerce, Vidyasagar University, Midnapore

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