Despite many initiatives in the past, financial inclusion remained a challenge, especially in rural and economically backward States, due to high documentation requirements, lack of awareness, and minimum balance mandates. To overcome these barriers, the government launched the Pradhan Mantri Jan Dhan Yojana (PMJDY) on August 28, 2014, with the aim of achieving universal financial inclusion. The scheme allows individuals without a bank account to open a basic savings account at any bank, with no minimum balance requirement. By January 2015, over 12.5 crore accounts were opened, and as of January 2025, the total reached 54.5 crore, with 61 per cent of these accounts held by women. This rapid expansion has provided access to savings, remittance, credit, pension, and insurance services, ensuring affordable banking for all.

Since some individuals hold multiple accounts, understanding progress in banking services requires examining the proportion of households or individuals with bank accounts. This analysis is crucial, as access can vary widely, with all or none of a household’s members having accounts. While the NSSO’s 70th round ‘Debt and Investment Survey’ (January-December 2013) provides household-level data, the 77th round (January–December 2019) offers only individual-level data. However, we can estimate the percentage of households with bank accounts using unit record data.

The surveys shows that the proportion of households with at least one bank account increased from the 68.8 per cent in 2013 to 97.8 per cent in 2019 in rural areas and from 79.5 per cent to 96.9 per cent in urban areas. This indicates that, by 2019, access to bank account had become nearly universal across rural and urban India. Access to banking services advanced notably during 2013-2019, eradicating inter-State disparities as well. By 2019, more than 95 per cent of rural households in every State had bank accounts. The remarkable growth in banking services can be attributed to the flagship PMJDY scheme.

Inter-State disparity declined

This scheme has particularly benefited residents of economically underdeveloped States such as Bihar, Jharkhand, West Bengal, Odisha, Chhattisgarh, Madhya Pradesh, and Assam. These States, characterised by predominantly rural populations with limited access to basic banking services, witnessed substantial surges in the percentage of rural households with bank accounts. For instance, Bihar experienced a rise of 55.1 percentage points, Jharkhand 47.9 percentage points, West Bengal 43.4 percentage points, Odisha 38.4 percentage points, Chhattisgarh 38.3 percentage points, Madhya Pradesh 38 percentage points, and Assam 37.1 percentage points during 2013-2019. The urban sector also benefited significantly from the PMJDY. By 2019, all States reported more than 90 per cent banking accessibility among urban households, except Kerala which reached high accessibility by 2013. These numbers suggest that the PMJDY played a crucial role in bridging the gap in banking access between affluent and economically disadvantaged States.

Financial inclusion

At the individual level, the NSS 77th round survey found that banking services were relatively equally accessible in both rural and urban areas, with 84.4 per cent of individuals in rural areas and 85.2 per cent in urban areas having at least one bank account. The NSS 78th round Multiple Indicator Survey showed that by 2021, the proportion of individuals with bank accounts had risen to 89.4 per cent, with rural areas at 89.3 per cent and urban areas at 89.6 per cent. By 2023, this figure increased to 94.6 per cent, with rural and urban areas at 94.6 per cent and 94.4 per cent, respectively. The proportion was 96.2 per cent for males and 92.8 per cent for females, according to the (NSS 79th round on Comprehensive Annual Modular Survey).

Among all States and Union Territories, Chandigarh achieved 100 per cent bank account coverage. Out of 36 States and UTs, 21 had more than 95 per cent of individuals with bank accounts, and only six states reported less than 90 per cent coverage. These figures underscore the near-universal financial inclusion achieved in India at individual level.

Significant achievements

Deposits under PMJDY has increased from ₹15,670 crore in March 2015 to ₹2,32,502 crore in March 2024, reflecting a growth of 1,380 per cent or a compound annual growth rate of 40 per cent. This is also evident in the average deposit per account, which has increased from ₹1,065 to ₹4,467, a 4.2-fold rise with a 20 per cent CAGR.

The government has aimed to establish a domestic payment network as an alternative to global giants like Visa and MasterCard. As part of this initiative, over 37 crore RuPay debit cards have been issued under the PMJDY scheme as of December 2024. A notable feature of the RuPay PMJDY debit cards is the inclusion of personal accidental death and total disability coverage of up to ₹2 lakh. This scheme goes beyond just savings or deposits; it has empowered the common man to embrace digital technologies. The number of digital transactions has increased from 2,338 crore in 2018-19 to 16,443 crore in 2023-24. Further, direct benefit transfers of ₹34 lakh crore have been channelised through PMJDY accounts, helping reduce leakages in government schemes in India by directly transferring funds to beneficiaries’ bank accounts.

In addition to facilitating savings, PMJDY has provided credit access to individuals without a formal financial history. By showing saving patterns, account holders can now get loans from banks and financial institutions. For instance, Mudra loan sanctions grew at a compounded annual rate of 9.8 per cent from 2018-19 to 2023-24. This access to credit is transformative as it empowers individuals to grow their incomes.

Persistent digital divide

The widespread use of technology has significantly promoted online banking transactions, which are essential for fostering a cashless economy and reducing black money and corruption. As per the NSS 79th round Comprehensive Annual Modular Survey, 37.8 per cent of individuals aged 15 and above were able to perform online banking transactions. However, gender disparities were evident, with 25.2 per cent of females and 47.1 per cent of males capable of online banking. Urban areas showed higher proficiency (50.6 per cent) compared to rural areas (30 per cent).

The NSS 79th round survey also highlighted substantial State-level disparities in online banking capabilities. While Chandigarh and Telangana reported more than 60 per cent of their population capable of conducting online banking transactions, several States lagged significantly, with figures below 30 per cent. For instance, Tripura reported 12.8 per cent, Meghalaya 17.9 per cent, Chhattisgarh 19.1 per cent, West Bengal 21.5 per cent, Uttar Pradesh 24.4 per cent, Assam 27 per cent, Jharkhand 27.4 per cent, Odisha 29.2 per cent, Gujarat 29.7 per cent, and Madhya Pradesh 29.8 per cent. This highlights the uneven progress in digital financial literacy and underscores the need for targeted interventions to bridge the digital divide.

The way forward

The PMJDY has significantly expanded access to banking, with nearly every household having at least one account. However, the Global Findex Database 2021 shows that 35 per cent of accounts in India remain inactive. In a 2023 paper, Akhand J Tiwari and Graham AN Wright identify the opening of multiple PMJDY accounts as a key cause, while Manuela Günther’s 2017 study, ‘The Progress of Financial Inclusion in India: Insights from Multiple Waves of Survey Data’, notes that 51 per cent of PMJDY account-holders also have non-PMJDY accounts.

Despite increased account ownership, challenges remain in utilising accounts for banking services and digital transactions. Disparities between States highlight the need to improve digital transaction literacy, particularly in disadvantaged regions. Targeted solutions like creating awareness, financial education, fintech partnerships, and incentives can help.

Looking ahead, financial inclusion in India is poised to play a transformative role in driving economic growth. By addressing the root causes of inactivity and empowering individuals with the skills to engage in digital transactions, the country can unlock the full potential of its inclusive banking system, fostering greater financial participation and supporting the broader goal of economic development.

The writers are Assistant Professors at the Sardar Patel Institute of Economic and Social Research (SPIESR) and the Institute of Rural Management Anand (IRMA), respectively

Published on March 24, 2025