You are on page 1of 9

1/21/2015

Mrunal(Banking)PrimeMinister'sJanDhanYojana:Features,Benefits

Mrunalhttp://mrunal.org

[Banking]PMJanDhanYojana:SalientFeatures,Benefits,
Limitations&truckloadofcriticism
PostedByMrunalOn13/10/2014@7:45pmInBanking|150Comments

1.
2.
3.
4.
5.

Prologue
Disturbingnumbers
PMJDY:SalientFeatures:
JanDhan:Benefits,ProArguments
Criticism/AntiArguments
1. Multipleaccountstogetmoreinsurance
2. Moneylaundering
3. Insurancethuggaryinsmallfonts
4. BCAmodelisEPICFAIL
5. DBTEpicfail=>viciouscycle
6. MockQuestions

Prologue
Topicspartofthe[Current]series
August:schemelaunched
Septemberweek3:RajanbhaifindsfaultsinJanDhanschemewhilespeakingin
aseminar.Takingcuefromhim,allthecolumnistshavejumpedina
competitionwhocancriticizethisschememore?

Disturbingnumbers
LackoffinancialinclusioninIndia
Only
59%

OfIndianhouseholdshavebankaccounts(Census2011)

Ofthebankaccountsarenotoperatedatall.Mostprobablythose
accountsopenedpartofMNREGAandothercampaigns.
~46,000 Villageshavebankbranches.(totalvillagesareabove6lakhs.)
VillageshaveBankingCorrespondentAgents(BCA).Butthismodelis
3.3lakh
epicfail,wellseeitfurtherinthisarticle.
34%
istheaverageloaninterestchargedbylocalmoneylenders.
OfRuralDalitfamilieshavetoborrowmoneyfromlocalmoneylenders/
55%
Shroffs.
50%

24%

IstheaverageloaninterestratechargedbyPrivatemicrofinance
institutions(MFIs).
by2010,Microfinanceagentsevenstartedgoondagiritorecover
loanmoney,andthismodelbegantodecline.

http://mrunal.org/2014/10/bankingpmjandhanyojanaaccountsalientfeaturesbenefitslimitationscriticism.html/print/

1/9

1/21/2015

Mrunal(Banking)PrimeMinister'sJanDhanYojana:Features,Benefits

ItdoesntmeanGovernmentandRBIhaventnothing.Sinceindependence,they
havelaunchedmanyinitiativesforfinancialinclusionBankNationalization,Regional
Ruralbanks,cooperativebanks,Bankingcorrespondenceagent,Swabhiman,
Swavlamban,Microfinance,Nofrillsaccount,25%ruralbranchrule,BharatiyaMahila
Bankandsoon.
YoucanreadmoredetailsaboutthemunderMrunal.org/economyparticularlyunder
the[NachiketMor]Committeearticleseries.Anyways,movingon:

PMJDY:SalientFeatures:
Who
When
Purposese
Target
motto

DepartmentofFinancialServicesunderFinanceministry
15thAugust2015
Financialinclusion
Openbankaccountsfor7.5crorefamiliesinoneyear.
MeraaKhaataaBhagyaVidhata

PMJDYschemehas6pillarsintwophases

Phase1:Threepillars(2014to2015,15thAugust)
http://mrunal.org/2014/10/bankingpmjandhanyojanaaccountsalientfeaturesbenefitslimitationscriticism.html/print/

2/9

1/21/2015

Mrunal(Banking)PrimeMinister'sJanDhanYojana:Features,Benefits

1.Service
area

Countrywillbedividedintosubserviceareas(SSA)
EachSSAwillcover10001500households
Eachhouseholdwillhaveabankingoutletwithin5kmdistance.

2.Account

Eachhouseholdwillhaveatleastonebankaccount.
Evenminorsof10yearsandaboveage,canopen.
WithaRupaydebitcard
Rs.1lakhaccidentcoverperaccount.Conditions:
1individualandmultiplebankaccounts=stillmaximum1
lakhcover
1family,husbandwifeseparateaccounts=eachgets1lakh
cover.
Ifyouopenaccountbefore26thJanuary2015,youllgetadditional
Rs.30,000lifeinsurancecover.
Ifyourgoodcredithistoryforfirst6months=>Rs.5,000overdraft
facility.Ifsamefamilyhasmultipleaccountsthenonly1account
getsthisbenefitfirstpreferencetowomansaccount.

3.Literacy

Financialliteracyprogrammestomakejuntaaawareofbenefitsof
savingandinvestingmoneyproperly.

Phase2:NextThreepillars(2015to2018)
Creditguaranteefundtocoverlossesinoverdrafts.(Becausesome
4.CGF
villagersmightuseoverdraftfordesiliquorandthendefaultin
repayment)
IfJDYaccountholderisinterested,hecanbuymicroinsurance
5.Insurance
product.

6.DBT

EarlierGovernmentlaunchedSwavalambanYojanatomake
unorgnizedsectorworkersjoinNPSscheme.
ThosepeoplewillgetNPSpensiondirectlyintheseJanDhan
accounts.
Governmentwillalsotryfordirectbenefittransfer(DBT)i.e.
sendingschemesubsidymoneydirectlytobeneficiariesjan
dhanaccounts.

HowtoopenJanDhanaccount?
ifyoualreadyhaveabankaccount,noneedtoapplyagain.JustgetaruPay
debitcard,andyougetautomaticallyenrolledintothissystem.
JanDhanaccountsareputunderCoreBankingsolution(CBS)platform,
thereforeitcanbetransferredfromonebranchtoanother,asperyourrequest.
ifyoudonthaveanyaccount,openanewaccountwithanyoneofthefollowing
documents:AadharVoterscard,Drivinglicenses,PAN,Passportetc.

Smallaccount
http://mrunal.org/2014/10/bankingpmjandhanyojanaaccountsalientfeaturesbenefitslimitationscriticism.html/print/

3/9

1/21/2015

Mrunal(Banking)PrimeMinister'sJanDhanYojana:Features,Benefits

Ifapersondoesnthaveanyofficialdocuments,stillbankcanopenitsaccount
withjusthisphotoandsignature.
ButsuchaccountwillbecalledSmallaccount.RBIhasputfollowing
restrictionsonthem
1.
2.
3.
4.

notmorethan1lakhrupeeloanperyear
cannotwithdrawmorethan10,000rupeespermonth.
cannotdepositmorethan50,000rupeesinaccount
Validfor12monthonly.

JanDhanYojana:Benefits,ProArguments
Willaidfinancialinclusion,willrescuevillagersfromtheclutchesofevilmoney
lenders.Youcancitethosedisturbingnumberstojustifyyourprostandinthe
groupdiscussion(GD)whenothercandidates(brainwashedbytheHindu)tryto
createfishmarketinGDbycriticizingeverythingunderthesun.
CouldboosthouseholdsavingsratesimilartoBankNationalizationin1960s.
DirectBenefittransfer(DBT)moneywillflowintothoseaccounts(andfromthere
againasloanstootherneedypeople.)Thussavingswillturnintocapital.
Subsidyleakagewilldecline.
WillincreaseInsurancepenetration.
Overdraftonlyaftermonitoringperformance=>winwin,rarechancesof
NPA/defaults.

JanDhanYojana:Criticism/AntiArguments
PrimeMinistersJanDhanYojana(PMJDY)willfailbecause:

Rajansworry:moneylaunderingandMultipleAccountsinJanDhanYojana
http://mrunal.org/2014/10/bankingpmjandhanyojanaaccountsalientfeaturesbenefitslimitationscriticism.html/print/

4/9

1/21/2015

Mrunal(Banking)PrimeMinister'sJanDhanYojana:Features,Benefits

Multipleaccountstogetmoreinsurance
Rajanbhaiisconcernedthat:
JanDhanschemegivesRs.1lakhinsuranceoneachaccount.
Togetlargeinsuranceoroverdraftfacility,samepersonmightopenmultiple
accountsinmultiplebanksonewithAadharcard,onewithPANcard,onewith
voterscard.
Sarkaaribanksmayalsooverlooknuisance,inordertomeettheirtargets.
RecalltheearlierarticleonPJNayakCommittee.SinceGovernmentisthe
majorityshareholderinsakaaribanks=>Chairmanandboardofdirectorshave
pressurefromGovernment=>theypressurizebankstaffstoenrollmaximum
bankaccountssothatModicanbragaboutitduringhisMadisonsquare
speech.
RBIsuggestion:banksshouldestablishasingleinformationsharingsystemto
weedoutsuchmultipleaccounts.
Counterargument:StatebankofIndiahasmadeclearguidelinesthatevenif
multipleaccountsofsameperson,hewillgetonly1lakhcover.Andsinceall
accountsareputunderCorebankingsolution(CBS)platform=duplication/
mischiefunlikely.

Moneylaundering
RajanbhaiisalsoworriedthatJDYaccountscouldbeusedformoneylaunderingand
Hawalaoperations.

Smurfing

HawalaOperatorscanspiltthewholeamount(say1crore)into
severalsmallunitsintoseveralJDYaccounts
Thensendmoneyoverseaswithoutcomingunderthewatchfuleyes
ofIncometaxorEnforcementdirectorate.

Money
mules

JustlikethoseDrugmuleswhoingestcondompackedwith
narcoticdrugsanddeliverittoothercountryviaairplanes.
Moneymules=individualswithJDYaccounts,whofacilitateHawala
operatorstosendmoneyviatheiraccount.

Insurancethuggaryinsmallfonts
JanDhangivesyoufreeaccidentinsurancecoverworthRs.1lakh.
ButthereisasecretconditionyoumustuseRuPaydebitcardatleastonce
every45days.
Thisisnotbepossibleforpoorfamiliesinremotetribalareas.So,theylllosethe
benefitduetoinactivity.
Whythissecretcondition?
Becauseinsurancemoneydoesntfallfromsky.Evenifyouregettingitforfree,
http://mrunal.org/2014/10/bankingpmjandhanyojanaaccountsalientfeaturesbenefitslimitationscriticism.html/print/

5/9

1/21/2015

Mrunal(Banking)PrimeMinister'sJanDhanYojana:Features,Benefits

stillsomeonehastopaythepremium,right?Inthiscase,Modiisnotpayingthe
premium.(Becausehewantstokeepfiscaldeficitlow).
YourpremiumispaidbyNPCI.NationalPaymentsCorporationofIndiaowns
therupaycardsystem.Therefore,theywantyoutofrequentlyusethecard.

BCAmodelisEPICFAIL

Justlikeacoachingwalladoesntfinishsyllabusifstudentsareless,BCA
willrunawayifcommissionislow
JanDhanaimstodivideentrycountryintosubserviceareas(SSA)
WithinthoseSSA,eachhouseholdwillhaveabankingoutletwithin5km
distance.
http://mrunal.org/2014/10/bankingpmjandhanyojanaaccountsalientfeaturesbenefitslimitationscriticism.html/print/

6/9

1/21/2015

Mrunal(Banking)PrimeMinister'sJanDhanYojana:Features,Benefits

Sincebankscannotopenbrancheseverywhere,Governmentaimstoachieve
thistargetviaBankingBusinessCorrespondenceAgents(BCA)orBankMitra.
WhatretheProblemwithBCAmodel?
1. Theyget2%commissiononeachtransaction.Monthlyincome~2000rupees.
2. Asaresult,theyquicklyloseinterestinthisgame,beingsomeothersidejobs.
So,BCAareneveravailablewhencustomerneedsthem.47%oftheBCAare
untraceable.(saysRBIsurvey)
3. Allegationsofmalpractice.Forexample
1. Foropeningnewaccount,theyaskseparate100rupeesasservice
charge(althoughnobankorRBIhasauthorizedsuchpayment).
2. SomeBCAaskseparatecommission/bakshishfromilliteratevillagersfor
withdrawingmoneyfromaccount(beyondtheofficial2%)
3. Forloanprocessingtoo,theydemandseparatecommission,outside
banksknowledge.
JanDhanreliesonthefailedBCmodel=>Jandhanwillfailaswell.

DBTEpicfail=>viciouscycle
PMJDYaimstomakeallschemesubsidypaymentsdirectlytoJanDhanbank
accounts.ButthisDirectbenefittransfer(DBT)itselfisafailurebecause:
Aadhaarprojectisyettocoverallresidents.
Aadharprojectfacingcourtcases,becauseUIDAIisnotastatutorybody,
backedbyanylaw.
UPAGovernmenthadtoadmitincourtthatAadharnumberisnotcompulsory
getSarkaarischemebenefits=>JuntaawontbemotivatedtogetAadhar
cards=>JanDhanwillhavetroubletransferringmoney.
ATBCAlevel,Biometricauthentication(fingerscan)=showing2530%errors.
SocitizenswillhavedifficultyinwithdrawingmoneyeveniftheyveAadharcard.
Nowifyoujointhedots
Dot
BCAwillget2%commissionontransaction
A
Dot DBTwillfail=juntawontgetmuchmoneyinJanDhanaccountsandthere
B
arefingerprintproblem=lesstransactions.

Dot
C

PrimeMinisterModibelievesinfreemarketeconomyandminimum
governance.
Similarlystategovernmentstoo,willreducetheirsubsidyburdento
complywithFRBMact.
Gradually,lesssubsidiesonfood,fertilizerandfuel.So,evenifDBT
worksfine,juntaawontgetmuchmoneyintheiraccounts=less
transaction=lesscommissiontoBankMitra.
JoinDotsA+B+C=BCA(BankMitra/Bankingcorrespondenceagent)willget
verylowcommission,hellloseinterestandservicequalitywilldecliningjustlike

http://mrunal.org/2014/10/bankingpmjandhanyojanaaccountsalientfeaturesbenefitslimitationscriticism.html/print/

7/9

1/21/2015

Mrunal(Banking)PrimeMinister'sJanDhanYojana:Features,Benefits

thosecoachingwallas,whodontfinishsyllabusifbatchstrengthislow.
Badcustomerexperience=PeoplecantuseRupaycardsevery45days=
insuranceprotectionalsogone=furthernegativeexperience=JanDhan
accountswillbecomedormant.Householdswillagainresumesavingmoneyin
goldorwastingondesiliquor.
Misc.Antiarguments
1. JDYisjustoldwine(nofrillsaccount)innewbottle(JanDhanAccount).when
earlierschemedidnotimprovefinancialinclusion,thereisnochance,newone
willsucceed.
2. SystematicandwellplannedreformsnecessaryasrecommendedbyNachiket
MorCommitteepaymentbanks,wholesalebanks,UEBAetc.ButGovernment
isinhastetocapturemediaattention.

Counterarguments
RuralincomeswillimprovebecauseofotherGovernmentschemesskillIndia,
makeinIndiaetc.
So,Peoplewillusebankaccounts,evenifGovernmentgivesthemnosubsidies
/DBT/MNREGA.
Withpenetrationofmobile,internetbankinganddigitalliteracy,peoplewillbe
abletomaketransactionsonline.BCAwillbecomeirrelevant.
Therefore,evenifAadharcard,DBTorBCAmodelfails,itisnotnecessarythatJan
Dhanwillautomaticallyfail.

MockQuestionsaboutPMJanDhanYojana
MCQs
InbankandRBIexamsMCQsabouttrivialfactsandfigures.Example
OnwhichdaywasJDYlaunched?
Howmanyaccountswillbeopenedinoneyear?
Howmuchoverdraftoffered?
Whatisthemottoofthisschemeetc.
InCSAT2015:theyllgiveyouafewstatementsaboutJDYssalientfeatures.
Youllhavetofindcorrectofthem.Only1and2only1,2and4.andsoon.
Mains
Answerfollowingin200wordseach
1. Thoughambitious,PMJDYfacescertainoperationaldifficulties.Elaborate
2. Discusstheinitiativestakensincetheindependence,forthefinancialinclusion
ofruralfamilies.
3. EnumeratethesalientfeaturesandbenefitsofPMJDY.
Interview/GD:PMJDYproandantiarguments.Andwhatstepsshouldbetakento
ensureitssuccess.
http://mrunal.org/2014/10/bankingpmjandhanyojanaaccountsalientfeaturesbenefitslimitationscriticism.html/print/

8/9

1/21/2015

Mrunal(Banking)PrimeMinister'sJanDhanYojana:Features,Benefits

ArticleprintedfromMrunal:http://mrunal.org
URLtoarticle:http://mrunal.org/2014/10/bankingpmjandhanyojanaaccount
salientfeaturesbenefitslimitationscriticism.html

Copyright2014Mrunal.Allrightsreserved.

http://mrunal.org/2014/10/bankingpmjandhanyojanaaccountsalientfeaturesbenefitslimitationscriticism.html/print/

9/9