As the Pradhan Mantri Jan Dhan Yojana (PMJDY) completes its eighth year, it is becoming increasingly clear that this is a rare State-initiated welfare scheme that has not just met but exceeded its initial promise. That the scheme has made a material difference to financial inclusion is evident from the consistent increase in its coverage of households, with the number of accounts rising from 17.9 crore in August 2015 to 46.25 crore in August 2022. Contrary to initial criticism that most of the accounts would lie dormant and prove a dead weight on banks, PMJDY accounts have seen healthy activity with inoperative accounts shrinking from 24 per cent in 2015 to 19 per cent now. Against concerns that low-income households would display greater appetite for loans than savings products, these accounts have seen an eight-fold jump in their deposits from ₹22,900 crore in August 2015 to ₹1.73 lakh crore in August 2022. While this is still a small fraction of the aggregate CASA balances of Indian banks (over ₹150 lakh crore), it should be pointed out that account-holders are low-income daily wage earners and informal sector workers. The rapid expansion of PMJDY offers hope that as income levels of the households rise, their bank balances will keep up, presenting the financial services industry with a readymade funnel of bottom-of-the-pyramid customers. It is therefore welcome that the government, having achieved 100 per cent household coverage of PMJDY in most States, is shifting its goalpost to a bank account for every adult.
More than these numbers, it is the qualitative benefits delivered by PMJDY, many of them not envisaged during its launch, that are more significant. The scheme has made a remarkable difference to women’s empowerment, with the proportion of women account-holders rising from 15 per cent in 2015 to over 56 per cent now. Jan Dhan has helped deliver micro-credit to women-led Self-Help Groups and Mudra loans to women entrepreneurs. With 67 per cent of the accounts in rural and semi-urban areas, it has created grassroots demand for banking touchpoints, fuelling self-employment opportunities for bank Mitras in the hinterland. With Aadhaar-seeding allowing for identity verification, the Centre and States now deliver welfare benefits such as MNREGA wages, pension and ex-gratia payments directly into the bank accounts of beneficiaries in a relatively leakage-free mode, with the payments offering an instant safety net during Covid. The deep penetration of Jan Dhan accounts has also been the primary catalyst behind India’s rapid strides in adopting digital payment modes such as the UPI and debit cards, with 31 crore RuPay cards now been issued.
Having put in place a robust foundation for the ordinary Indian to tap into basic banking services, the Centre must now look to build on it by making sure a wider variety of financial products are accessible to her. The scheme’s attempts so far to offer accident insurance and overdraft facilities have met with patchy results, with less than 1 per cent of users said to have availed of overdrafts and a high claims rejection rate in insurance. This points to the need for government or Reserve Bank of India-funded awareness initiatives and better grievance redressal mechanisms. It is also a pity that PMJDY, for all its success, remains a PSU bank spearheaded initiative, with private banks accounting for just 2.8 per cent of accounts. One hopes India’s nascent fintech industry, which is retail-focussed, sees the promise in offering customised investment, savings, insurance and credit products to India’s bottom-of-the-pyramid households, even if private banks stay obsessed with the creamy layer.