Reaping the benefits of inclusion

M Ramesh is relieved. Till three years ago, the 28-year-old physically challenged man from Chinnapuram, a remote village in Andhra Pradesh’s Krishna district, had no source of income. The sole bread winner of the family was his father, who had fallen sick and was unable to work.

But since 2014, Ramesh has been getting ₹1,000 a month as pension from the Government. The money is transferred to an account he got from Andhra Bank, under the Pradhan Mantri Jan Dhan Yojana (PMJDY). Linked with Aadhaar, the account is basic and he doesn’t need to keep a minimum balance.

“I neither had a bank account nor an ATM card till three years ago. I’m somewhat comfortable now,’’ says Ramesh while getting onto his tricycle at his home. He uses a RuPay debit card to withdraw money.

Maganti Subbamma, 68, also lives in Chinnapuram. And she too has benefited from the PMJDY scheme. “I am able to save ₹100 out of my monthly pension of ₹1,000. And I operate my account from home, thanks to banking correspondents (BCs),’’ she says. In the pre-Jan Dhan days, Subbamma used to wait for hours to receive her pension in treasury offices.

Same is the case in the remote hamlet of K P T Palem, about an hour’s drive from Chinnapuram. Located by the Krishna river, this is a hamlet inhabited mostly by fishermen. According to the hamlet’s Sarpanch, Tirumalsetti Jayaraj, many of the 1,000 voters in the village got bank accounts for the first time after the introduction of the PMJDY scheme. They are beginning to see the benefits of formal banking. “The fishermen use their bank accounts for receiving payments from buyers,’’ he says.

Everyday, the fishermen sail to sea for fishing around 10 pm and return in the early hours the next day. They use the services of the BCs during daytime, says Jayaraj, who is an electrician, as well as a fisherman.

Chinnapuram and K P T Palem have been among the best performers under the Government’s financial inclusion mandate. Chinnapuram was the first in the State to record an insurance claim.

Launched in August 2014, the PMJDY scheme has had a visible impact on the lives of those who were yet to benefit from the rapid rise of the country’s financial services sector. Dubbed as the world’s biggest financial inclusion drive, with an entry inthe Guinness Book of Records to boast, the PMJDY has 30.67 crore beneficiaries. For the first time they were brought under the ambit of formal banking. Three years on, the total balance in their no-frills accounts stands at ₹69,026.72 crore (as on November 22). The scheme also offers a life cover of ₹30,000 to each of its beneficiary. Also, the National Payment Corporation of India (NPCI) has so far issued 23.05 crore RuPay debit cards to the accounts holders.

One of the main benefits has come in the form of integration of Jan Dhan accounts with the direct benefit transfers of Government incentives. The distribution of pension and welfare and subsidy related payments are being done through these accounts.

While its benefits have been immense, the scheme has also been a mammoth challenge for the banking system. “It was a huge task in initial years to educate people on the scheme and open accounts. Then came the Aadhaar seeding, followed by motivating people to use the RuPay debit cards issued to them,’’ recalls K N Venkateshwarlu, Manager of the Chinnapuram branch of Andhra Bank.

J Raghuram, the Deputy Branch Manager, adds: “Just imagine bundling of so many tasks such as Aadhaar enrolment, bank linkage and account openings... and all along we had to continue with the routine banking operations,’’ he quips.

For public sectors banks, which have become the channels of many welfare schemes, the Jan Dhan challenge has also brought some laurels. For instance, out of the 30.67 crore beneficiaries, the public sector banks opened, and now operate 13.15 crore accounts. On the other hand, regional rural banks and private sector banks have 4.17 crore and 60 lakh accounts, respectively. The remaining accounts are in bank branches in metros and cities.

At the same time, banks have been worried about the operating cost of Jan Dhan accounts. As per the data submitted by the Government of India in the Parliament early this year, many banks are not maintaining cost of operations of PMJDY accounts. However, in the case of State Bank of India (SBI), maintenance of these accounts cost it ₹774.86 crore in the first three quarters of last year.

While the banks played their part by lending their infrastructure, the silent foot soldiers of the PMJDY scheme have been the BCs, who are also called Bank Mitras.

There are 1.26 lakh BMs delivering branch-less banking services to crores of rural customers across the country. They are fully equipped with gadgets needed for rendering banking services at the door steps of the customers, besides also giving insurance and pension related services, says Venkateshwarlu, the Andhra Bank branch manager. He adds that these services are being delivered through biometric authentication and by swiping Rupay ATM/ Debit cards.

“One of the reasons for popular use of these accounts by the poor and elderly is the door-step delivery of banking services,’’ says Raju, a BC working for Andhra Bank. Each BC covers about 700 to 1,000 customers across a few villages every month. Each earn ₹6,000 - 10,000 monthly. More needs to be done though. Making an observation on the impact of PMJDY, Reserve Bank of India (RBI) Governor Urjit Patel in a recent speech said that there is a further need to ease access to bank accounts through BCs, payment banks, and point-of-sales machines so that these are used frequently.

Easy payments, access to cash-in and cash-out facilities, and widespread availability of secure savings instruments have to be the next objectives in the financial inclusion of households, he observed.

The demonetisation of ₹500 and ₹1,000 currency notes in November 2016, has been a litmus test for the PMJDY scheme. One was the sudden rise in the balance of bank accounts. As per Government data, the total balance in all the Jan Dhan accounts stood at ₹45,302 crore, as on November 9, 2016, the day demonetisation came into effect. By November 23, the balance surged to ₹72,834 crore. Prior to demonetisation, balance in Jan Dhan accounts showed little variation for six months.

Normally, Jan Dhan account holders who haven’t furnished their KYC details can deposit up to ₹50,000. The limit doubles to ₹1 lakh with minimum KYC compliance. The same account can be used like a normal savings bank account if it meets all the KYC norms, and any amount of money can be deposited. Hypothetically, even if all the Jan Dhan accounts became KYC-compliant, from where did all the money come?

The sudden surge in accounts raised questions on the possible misuse of these accounts to park black money. While the RBI tightened norms pertaining to the deposit and withdrawal of cash, banks were asked to look into the matter. But nothing tangible has come out so far on the possible causes for the surge.

If things were back to ‘normal’ in the early part of this year, and there was even a correction, cash started flowing into the PMJDY accounts again from July. In the four months till October, ₹2,554 crore were added in these accounts, substantially higher than the ₹400-crore worth deposits from mid-May to mid-July. The total balance in these accounts touched ₹67,330 crore by end of October, and increased to over ₹69,000 crore by end of November.

The spurt has been seen in the opening of accounts too. Over one crore new accounts have been opened in the last four months. Bankers attribute this to the increased focus on Aadhaar, digitisation and spurt in the use of RuPay cards – all of which act as incentives for rural customers to open accounts and also in keep a balance in their accounts.

According to data from the Finance Ministry, zero balance accounts under the scheme have come down since the demonetisation. In the first year of Jan Dhan, zero balance accounts made up for 77 per cent of the total. In November 2016, 23 per cent of accounts had zero balance. Now, after three years of the launch, 20 per cent of the Jan Dhan accounts remain empty. The unofficial view on the surge in accounts and balances, however, is that speculation about a second round of demonetisation is behind the increase in deposits.

Another concern for customers is lack of upgradation facility in the Jan Dhan accounts. Bankers say that customers who now keep a regular balance in their accounts demand facilities of a normal savings account that come with cheque books. Savings accounts also don’t have a cap on the number of transactions.

But this demand might remain unfulfilled unless rules are changed. Jan Dhan accounts are not required to have a minimum balance, a norm in savings deposits. At the same time, says Jayaraj, more facilities like cheque book and increasing withdrawal limits will help those involved in activities such as fishing.

As of now, the average balance in a PMJDY account should not cross the ₹50,000-limit. And and the annual turnover in the account should be below ₹1 lakh. Also, withdrawals should not cross ₹10,000 a month.

“Some customers are moving on their own to normal bank accounts. This is actually leading to a drop in the number of Jan Dhan accounts in some States. But we need to ensure automatic upgradation and a better clarity on this,’’ said a senior SBI official.

In the last one year, Andhra Pradesh has witnessed a fall in Jan Dhan accounts. The State had 89.7 lakh accounts, as on November 22, six lakh less than last year.

To make PMJDY a vehicle of financial inclusion, a constant review and adaptation, according to changing realities, is needed.

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