MEMBERS' REFERENCE SERVICE

LARRDIS
LOK SABHA SECRETARIAT, NEW DELHI

REFERENCE NOTE
No.32/RN/Ref./July/2016
1
For the use of Members of Parliament NOT FOR PUBLICATION

BULLET POINTS ON FINANCIAL INCLUSION:

PRADHAN MANTRI JAN DHAN YOJANA (PMJDY)

Prepared by Smt. Parma Chatterjee, Additional Director (23034926) and Smt. Promila Pant, Joint
Director of Lok Sabha Secretariat under the supervision of Smt. Kalpana Sharma, Joint Secretary
and Smt. Anita Khanna, Director

The reference material is for personal use of the Members in the discharge of their Parliamentary duties, and is
not for publication. This Service is not to be quoted as the source of information as it is based on the sources
indicated at the end/in the text. This Service does not accept any responsibility for the accuracy or veracity of
the information or views contained in the note/collection.
 FINANCIAL INCLUSION: PARDHAN MANTRI JAN DHAN YOJANA

INTRODUCTION

 Financial inclusion is broadly defined as the process of ensuring easy and reliable
access to the financial services and flow of timely and adequate credit for vulnerable
groups such as weaker sections and low income groups at an affordable cost.
 Financial inclusion acts from the supply side by providing and expanding financial
market and services that people demand from time to time under the changed
circumstances, whereas
 Financial literacy creates/stimulates the demand side by making people aware of that
they can get what they need/demand.
 Financial inclusion is important for India, because it can accelerate socio-economic
growth rate, bring down poverty and income inequality and add value to country’s
sustainable and inclusive growth1.
 According to Census 2011, only 14.48 crore households (58.70 per cent) of 24.67
crore in the country had access to banking services.

PARDHANMANTRI JAN DHAN YOJANA

 With a view to increasing banking penetration and promoting financial inclusion a

National Mission on Financial Inclusion named as Pradhan Mantri Jan Dhan Yojana
(PMJDY) was formally launched on 28th August, 2014 at national level by the
Prime Minister. PMJDY is aimed at covering all households with at least one bank
account per household across the country.

1
Financial Inclusion: An opportunity for Banks and Business by Dr. Amit Patel, Kurukshetra, August 2015, pp.
31-32
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OBJECTIVES OF PMJDY

 Universal access to banking facilities for all households across the country
through a bank branch or a fixed point Business Correspondent (BC) within a
reasonable distance.
 To cover all households with atleast one Basic Bank Account with RuPay Debit
card having inbuilt accident insurance cover of Rs.1 lakh.
 An overdraft facility upto Rs.5000/- after satisfactory operation in the account for
6 months.
 A Life Cover of Rs.30,000/- to those beneficiaries who open their accounts for
the first time from 15.08.2014 to 31.01.2015.
 Financial literacy programme which aims to take financial literacy upto village
level.
 The Mission also envisages expansion of Direct Benefit Transfer under various
Government Schemes through bank accounts of the beneficiaries.
 Providing micro–insurance to the people.
 Unorganised sector Pension schemes through the Business Correspondents 2.

 Comprehensive financial inclusion of the excluded section is proposed to be

achieved by 14 August 2018.

 Banks have engaged Business Correspondents Agents (BCAs)/Bank Mitras who go

to such areas where opening of a Bank branch/ATM is not viable. These
BCAs/Bank Mitras represent the concerned banks and other banking services 3.

2
India, Ministry of Finance, Annual Report 2015-16 pp. 322-323.
3
PIB, Ministry of Finance, dated 21.9.2015.
 3

ACHIEVEMENTS UNDER PMJDY AS ON 29.6.2016

 22.29 crore accounts have been opened under PMJDY out of which 13.69 crore
accounts are in rural areas and 8.60 crore in urban areas.
 Deposits of Rs. 39251.57 crores has been mobilized.
 18.22 crore RuPay Debit cards have been issued under PMJDY.
 Aadhaar seeding has been done in 10.59 crore PMJDY accounts.
 Zero balance accounts has been reduced to 25.29 per cent4.

 Routing subsidies and welfare payments through the Jan Dhan scheme has reduced
leakages in subsidy transfer. According to the Economic Survey 2015-16, leakages
in LPG subsidy transfers fell 24 per cent because of the infrastructure created by Jan
Dhan accounts, Aadhaar and mobile networks, (JAM trinity)5.

MAJOR CONCERNS

 Bank account penetration is growing, thanks to Jan Dhan, but in rural areas physical
connectivity to the banking system remains limited, and BCS and mobile money
providers have not yet solved this last mile problem6.
 Despite Jan Dhan's record breaking feats, basic saving account penetration in most
state is still relatively low which is 46 per cent on average and above 75 per cent in
Madhya Pradesh and Chhatisgarh only 7.
 The speed of linking the accounts with Aadhar number has been very low. Less than
half of the 22.29 crore accounts were seeded with Aadhar as on 29.06.2016.
 Because all accounts are not Aadhar seeded, it is difficult to track if person has
another account or not and that leads to duplication.

4
India, Ministry of Finance, Department of Financial Services, PMJDY Progress Report as on 29.6.2016
5
India, Ministry of Finance, Economic Survey 2015-16, p. 50
6
Op.cit., Economic Survey, p. 62
7
Ibid, p. 52
 4

 Progress in reducing dormant account has been slow. As on 29.6.2016, more than 25
per cent of zero balance account meaning the account holders were not using the
bank account.
 Duplicate accounts are also one reason why several accounts are inactive 8.
 Regulations governing the remuneration of BCAs may need to be reviewed to ensure
that commission rates are sufficient to encourage BCAs to remain active”9.
 According to a study by MicroSave for the Finance Ministry, insufficient income for
banking correspondents and a deficiency in training, supervision and infrastructure
for these last mile delivery agents have impeded the reach of the Government
flagship scheme10.
 Accounts opened under the PMJDY could be very vulnerable to fraud practices.
Banks need to clearly guard against misuse of these accounts from money mulling.
 Banks should have robust system to monitor such accounts and the transaction made
therein11.

CONCLUSION
The significant change under the PMJDY is that the financial inclusion objective
has moved beyond the provision of simple no-frills accounts to meeting overall
financial needs of the poor, linking government benefits, overdraft facility and insurance
and pension to these saving accounts. The massive campaign around PMJDY led to a
surge in awareness, and for the first time in decades, bank officials, who would pursue
people to open accounts to meet their mandated targets, reported being pushed by
customers themselves12.

8
Duplicate accounts under Jan Dhan Plan rising: Survey, Business Standard, dated 12.3.2016
9
Op.cit., Economic Survey, p. 67
10
Last-mile connectivity a bane for Jan Dhan Scheme by Nitin Sethi and Ishan Bakshi, Business Standard,
dated 2.4.2016
11
Jan Dhan accounts are vulnerable to frauds: RBI, Economic Times, dated 23.5.2016
12
Don't undermined the strides made by Jan Dhan by Sumita Kale, Business Standard, 3 May 2016
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REFERENCES

1. Don't undermined the strides made by Jan Dhan by Sumita Kale, Business Standard,
3 May 2016
2. Duplicate accounts under Jan Dhan Plan rising: Survey, Business Standard, dated
12.3.2016

3. Financial Inclusion: An opportunity for Banks and Business by Dr. Amit Patel,
Kurukshetra, August 2015
4. India, Ministry of Finance, Annual Report 2015-16.

5. India, Ministry of Finance, Department of Financial Services, PMJDY Progress

Report as on 29.6.2016.

6. India, Ministry of Finance, Economic Survey 2015-16.

7. Jan Dhan accounts are vulnerable to frauds: RBI, Economic Times, dated 23.5.2016
8. Last-mile connectivity a bane for Jan Dhan Scheme by Nitin Sethi and Ishan Bakshi,
Business Standard, dated 2.4.2016.

9. PIB, Ministry of Finance, dated 21.9.2015.