PRADHAN MANTRI JAN DHAN YOJANA

Yogitha Karthik
19BA218
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INTRODUCTION

❏ ABOUT THE SCHEME, LAUNCH & OTHER RELATED SCHEMES

Financial inclusion is defined as a way of providing banking and financial solutions and services
without any sort of discrimination to every person in society. It specifically seeks to include
everybody in the community by providing them with basic financial services without looking at
the income or savings of an individual. Financial inclusion mainly focuses on providing
economically underprivileged parts of society with reliable financial solutions without any unequal
treatment. Without any signs of discrimination, it plans to provide financial solutions. It is also
committed to being honest without any secret transactions or charges when providing financial
assistance.

Financial Inclusion Schemes:

Several exclusive schemes for the purpose of financial inclusion were launched by the Government
of India. These programs are meant to provide the less privileged segments of society with social
security. The government launched schemes that hold financial inclusion in mind after a lot of
preparation and analysis by many financial experts and policy makers. Over the years, these
programs have been launched.

The list of the financial inclusion schemes in the country:

➢ Pradhan Mantri Jan Dhan Yojana (PMJDY)

➢ Atal Pension Yojana (APY)
➢ Pradhan Mantri Vaya Vandana Yojana (PMVVY)
➢ Stand Up India Scheme
➢ Pradhan Mantri Mudra Yojana (PMMY)
➢ Pradhan Mantri Suraksha Bima Yojana (PMSBY)
➢ Sukanya Samriddhi Yojana
➢ Jeevan Suraksha Bandhan Yojana
 ➢ Credit Enhancement Guarantee Scheme (CEGS) for Scheduled Castes (SCs)
➢ Venture Capital Fund for Scheduled Castes under the Social Sector Initiatives
➢ Varishtha Pension Bima Yojana (VPBY)

The Honorable PM, Narendra Modi, on August 15, 2014, launched "Pradhan Mantri JanDhan
Yojana (PMJDY)," which is a National Mission for Financial Inclusion. The challenge is gigantic
and a national priority. The Pradhan Mantri JanDhan Yojana will simultaneously be unveiled
across the nation on August 28, 2014. It will be officially introduced at the state level and also at
district and subdistrict levels in Delhi with parallel functions. The Pradhan Mantri Jan Dhan
Yojana lies at the heart of development philosophy of Sab Ka Sath Sab Ka Vikas. Every household
can gain access to banking and credit facilities with a bank account. This will allow them to get
out of the grasp of moneylenders, to manage to stay away from emerging needs caused by financial
crises, and, most importantly, to benefit from a variety of financial products. PMJDY was jointly
introduced by 20 chief ministers and several union ministers at various centres. Minister of Home
Affairs Rajnath Singh in Lucknow, Minister of External Affairs Sushma Swaraj in Bhopal,
Minister of Human Resources Development Smriti Irani in Surat, Minister of Law Ravi Shankar
Prasad in Chennai and Minister of Information & Broadcasting Prakash Javadekar in Pune.

Even after six decades of post economic independence, poverty and exclusion continue to
dominate the socioeconomic and political discourse in India, despite multiple measures for
financial inclusion. While economic growth during the post liberalization era of 1991 has shown
impressive progress, impact is yet to percolate to all sections of society and hence, India is still
home to 1/3 of the poor of the world. The 2011 census reported that just 58.7% of households had
access to banking services. 'Pradhan Mantri JanDhan Yojana (PMJDY)' aims to ensure access to
various financial services such as the availability of basic savings bank accounts, access to needs
based loans, remittance facilities, insurance and pension to excluded sections, i.e. weaker sections
and low income classes. Only with the efficient use of technology is this deep penetration possible
at an affordable rate.

❏ FEATURES OF THE SCHEME

Under this plan, 15 million bank accounts were opened on the first day, handled by the Department
of Financial Services, Ministry of Finance. This achievement was recorded by the Guinness Book
of World Records, stating: "The majority of bank accounts opened in a week as part of the drive
for financial inclusion is 18,096,130 and was achieved by the Government of India from 23 to 29
August 2014."By 27 June 2018, the plan had opened over 318 million bank accounts and deposited
over 792 billion ( US$ 12 billion). Mera Khatha, Bhagya Vidhatha (meaning "My account carries
me good fortune") is the slogan of the scheme. The scheme was launched following the failure of
previous government schemes, including Swabhimaan. Swabhimaan was the Government of
India's 2011 campaign designed to introduce banking services to broad rural areas.

Timeline:

It is suggested that the elaborate Financial Inclusion of the excluded sections be achieved by
August 14, 2018 in two phases as follows:

Phase I (Aug 15, 2014 - Aug 14, 2015)

➢ Universal access to banking facilities in all regions, with the exception of infrastructure
and connectivity constraints in regions such as Himachal Pradesh, Uttarakhand, J&K and
82 districts of Left Wing Extremism (LWE).
➢ Providing basic banking accounts and a RuPay debit card with an inbuilt 1 lakh accident
insurance cover. To make the account ready for DBT payment, the Aadhaar number will
be seeded.
➢ Financial Literacy Programme.

Phase II (Aug 15, 2015 - Aug 14, 2018)

➢ Overdraft facility up to Rs. 5000/- after six months of satisfactory operation or history.
➢ Creation of Credit Guarantee Fund for coverage of defaults in A/Cs with overdraft limit up
to Rs. 5,000/-.
➢ Micro Insurance
➢ Unorganized sector Pension schemes like Swavalamban.

A few of the operations in Phase II were also carried out in Phase I.

Mission Mode Objectives (6 pillars):

To be carried out in the Mission Mode, PMJDY envisages the provision of sustainable financial
services to all people. It contains of the following six pillars:-

1) Absolute access to banking facilities: mapping each district to cater to 1000 1500 families
in the Sub Service Area (SSA) in such a way that each dwelling has access to banking
services within a suitable distance, say 5 km by 14 August 2015.

2) Providing all households with Basic Banking Accounts with overdraft facilities and RuPay
debit cards.
 3) Financial literacy programme: an important part of the mission to encourage beneficiaries
to make the most of the financial services they obtain.

4) Credit Guarantee Fund: This will be to cover losses in the Overdraft accounts.

5) Micro Insurance: To provide all eligible individuals micro-insurance by 14 August, 2018,

and then on an ongoing basis.

6) Unorganized sector Pension schemes like Swavalamban: By 14 August, 2018 and then on
an ongoing basis.

Under the mission, the first three pillars would be given thrust in the first year.

❏ STRATEGY FOR ACHIEVEMENT OF OBJECTIVES

1) A broad collaborative approach with all stakeholders is suggested in order to achieve the
above goals. It is suggested that public-private partnerships should be promoted. In
addition, inter departmental integration and synergies can be utilised profitably.
To become Bank Mitr (Business Correspondent) of the Banks, the current rural
infrastructure of post offices that have Gramin Dak Sewaks would be optimally used.
The development of online fixed point Bank Mitr (Business Correspondent) to provide
basic banking services near the customer's doorstep will be one of the main objectives.

2) The strategy is to follow the Bank Mitr (Business Correspondent) model for the expansion
of banking services. It will make use of technical advancements such as the Rupay card
and mobile banking. Banks will use the RBI's rural ATM subsidy scheme and UIDAI 's
micro ATM subsidy scheme to increase their village-level capital.

3) In covering each household with bank accounts, convergence with the National Rural
Livelihood Mission (NRLM) in rural areas and the National Urban Livelihood Mission
(NULM) in urban areas would be pursued. The Telecom Department's expansion plans to
provide telecom connectivity in difficult areas would be effectively used for the provision
of banking facilities in these areas.
❏ IMPLEMENTATION OF PMJDY IN MISSION MODE

1) Reaching out – Network expansion and geographical coverage of the banks:

The first and fundamental pillar of PMJDY is the widening of the country's banking
network to reach out to parts of the population that are financially excluded.

(i) Bank Branches & ATMs:

The Public Sector Banks were proposing to build 7332 branches and 20,130 new ATMs in
the year 2014-15. However, the demands for branch expansion far outweigh the supply.
Through the Sub Service Area (SSA), the efficient and cost effective method for covering
rural areas is to map the entire region.

(ii) Swabhiman Villages:

Banks will aim to create a brick and mortar branch with a minimum staff strength of 1+1
or 1+2 in 74,351 villages with a population of 2000 or more that were covered by the BCs
in the previous campaign with regard to the viability of each centre. This could be achieved
over a span of 3-5 years in a staggered manner.

(iii) Mapping Sub Service Areas (SSAs): Under the current plan, to have at least one Sub
Service Area (SSA), all the 6 lakh villages are to be mapped according to each bank's
service area.

(iv) Coverage of SSAs: It has been proposed that through a combination of banking outlets
i.e. branch banking (traditional Brick & Mortar branches) and branch less banking SSAs
shall be covered.

(v) Working of Bank Mitr (Business Correspondents):

Bank Mitr (Business Correspondent) outlets will be completely equipped with computers
and other peripherals such as Micro ATM, biometric scanners, printers, webcams and
internet access, in both rural and urban areas. Bank Mitr is required to perform online
transactions that require Internet connectivity. As per the current status, however, there
may be certain connectivity related issues that need to be addressed immediately,
particularly in hilly and tribal areas of the country. There will also be a committee
composed of different stakeholders to work out technology related problems, like BSNL.

(vi) Eligibility for Bank Mitr (Business Correspondent):

Individuals and entities like unemployed youth & retired bank employee, retired teachers,
retired Government personnel, etc., kirana shops, PDS, NGOs/MFIs and section 25
 companies, Civil Society Organisations, agents of small saving schemes of GoI, individual
petrol pump owner, authorized functionaries of SHG, non-deposit taking NBFCs, Post
Offices/Postman/Gramin Dak Sewak, cooperative societies or other eligible
individuals/entities allowed by RBI from time to time etc. may be engaged as Bank Mitr
(Business Correspondent).

(vii) Mobile Banking:

Banks' "Mobile and Aadhaar Related Accounts" were envisaged by the Inter Ministerial
Group on the provision of basic financial services through detailed system work. The basic
financial transactions on these accounts can be performed through a mobile based PIN
system. Mobile wallet services offered by commercial banks, such as ICICI, for example.

2) Opening of Basic Saving Bank Account of every adult citizen:

(i) Opening of a zero-balance SB account (BSBDA):

Banks will be encouraged to make use of the e-KYC approach to support the opening of
accounts. The same up to the BC stage will need to be implemented by those banks that
have not enabled e KYC facilities.

(ii) In order to minimize the time needed for account opening, a one page account opening
form was built in the context of the campaign.

(iii) An ATM / Debit (RuPay) card will be issued to each SB account holder.

(iv) This account would be linked to the account holder's Aadhaar number and would
become the single point for receipt by the Central Government / State Government / Local
Bodies of all Direct Benefit Transfers (DBT).

(v) There would be a convergence with UIDAI 's efforts to enroll Aadhaar number
recipients during account opening.

(vi) Financial literacy sessions will be given to each account holder on how to manage his
/ her money and credit facilities.

(vii) After six months of adequate saving / credit history results, overdraft (OD) up to Rs.
5,000/- will be given to customers. The Credit Guarantee Fund would cover that OD
facility.

(viii) Within three months of the beginning of the campaign for a reliable report on the
coverage of households with banking facilities, banks will carry out a ground survey.
3) FLCC - Establishing number of Financial Literacy Centres (FLC) & Mechanism to
increase financial literacy:

This key pillar focuses on the readiness of individuals for financial planning and credit
availability. The experience of microfinance companies as well as Self Help Groups
(SHGs) has shown that people need to be made aware of the benefits of access to the formal
financial system, deposits, credit, the value of timely repayments and the development of
a strong credit history before using credit. Free financial literacy / education and credit
counselling for FLCCs.

(i) Revamping and expanding FLCCs to the block level in order to expand its scope.

(ii) Effective training technology through Video Conferencing.

(iii) Supervision and follow-up.

4) Credit Guarantee Fund:

The creation of a Credit Guarantee Fund is the fourth pillar of this plan. It is proposed that
the Nation Credit Guarantee Corporation (NCGC) should be housed.

(i) Learning how to handle this account and building a credit history is the first step towards
a higher dose of credit. It will also assist banks in the determination of credit for their
potential needs.

(ii) Up to 5,000/- is given as an overdraft after six months of adequate

operation/saving/credit history (it is a loan and not a grant).

5) Micro-Insurance:

The fifth pillar of this initiative is to provide residents with micro-insurance. A special
category of insurance policies, called micro-insurance policies, has been developed by the
Insurance Regulatory and Development Authority (IRDA) to promote insurance coverage
in economically vulnerable sections of society. Micro-insurance is defined and enabled in
the IRDA Micro-insurance Regulations, 2005. A general or life insurance policy with an
assured amount of Rs. 50,000 or less can be a micro-insurance policy.
 (i) Enabling the extension/distribution of machinery to provide micro-insurance products
and complete coverage of schemes such as Aam Admi Bima Yojana (Estimated target of
12 cr. Households, 4.6 cr Covered).

(ii) Aadhaar Enabled Micro Insurance to be printed from CSC location.

6) Unorganized sector Pension scheme - Swavalamban:

The sixth and the last pillar of this plan relates to the security of old age revenue. Over 85
percent of India's working population works in the unorganized sector. The aim of the
scheme is to encourage workers in the informal sector to save small amounts during their
working years, in order to allow them to receive a pension in their old age. To incentivize
and mobilize savings, the Swavalamban scheme uses co-contributions from the
Government of India

7) Role of technology:

The following products of technology are used/made available to support the

implementation of the scheme:

(i) Electronically Know Your Customer (e-KYC)

(ii) Transaction through Mobile Banking

(iii)Immediate Payment System (IMPS)

(iv) Micro - ATMs

(v) National Unified USSD Platform (NUUP)

(vi) RuPay Debit cards

(vii) Aadhaar Enabled Payment System (AEPS)

(viii) Aadhaar Payments Bridge System (APBS)

❏ MONITORING THE IMPLEMENTATION

1) DFS is developing a web portal at 'financialservices.gov.in' for online monitoring of the

establishment of Bank Mitr (Business Correspondent). In the sector, the tool is to ensure
sufficient coverage of the villages.

2) To monitor the function of Bank Mitr (Business Correspondent) in the field, each bank
would have a structured system generated by the MIS system. For the sake of convenience
and uniformity, the format will be standardized throughout the system. This will be
submitted periodically to the portal created for this purpose by DFS.

3) There will be two parts of the MIS reports to be collected for monitoring the campaign,
one of which will be the reports generated by the CBS banks on a weekly basis, and the
second part will have reports from the SLBCs, which will also include ground level
surveys. Within 3 months of the launch of the campaign, the ground level survey should
be completed.

4) The IBA will have a supervisory committee to monitor progress on a weekly basis. The
monitoring information is extracted from the DFS Portal.

5) In DFS, a project management committee comprising industry experts will be set up to

carry out day-to-day surveillance.
 ADMINISTRATIVE MONITORING STRUCTURE

Central Level:

Headed by Other members Frequency of monitoring

Mission Head Finance Minister of Quarterly

Minister Communications,
Minister of Rural
Development, Secretary
(FS), Secretary
(Telecom)

Steering Secretary Deputy Governor (RBI), Monthly

Committee CEO IBA, CEO BSNL,
Chairman NABARD

Minister Director Joint Secretary Nodal Officers of Weekly/Fortnightly

Banks, NABARD,
NPCI, BSNL

State Level:

Headed by Other members Frequency of monitoring

State Level Preferably Mission Heads of Major Monthly

Implementation Director, NRLM to Banks, Regional
Committee achieve congruence Heads of RBI and
with NRLM or NABARD, Insurance
Principal Secretary Companies etc.
(Finance)
 District Level:

Headed by Other members Frequency of monitoring

District Level District Collector Senior most officers of Fortnightly

Implementation banks in the district and
Committee NABARD, NRLM
members, Insurance
Companies, officers of
district administration
and Local Bodies

PROGRESS REPORT

Beneficiaries as on 23/09/2020 (All figures in Crore)

Bank Name / Number of Number of No Of Number Deposits in Number

Type beneficiaries- Beneficiaries- Rural- of Total Accounts of Rupay
rural/semiurban urban metro Urban Beneficia Debit
centre bank centre banks Female ries Cards
branches Beneficiari issued
es

Public Sector 19.82 12.55 17.72 32.38 100189.64 25.73

Banks

Regional 6.28 0.92 4.15 7.20 25284.16 3.19

Rural Banks

Private Sector 0.70 0.57 0.68 1.26 3946.90 1.15

Banks

Grand Total 26.80 14.04 22.56 40.84 129420.70 30.07

CRITICAL ANALYSIS

❏ PROS

i. A deposit interest.

ii. Accidental insurance cover for Rs. 1 Lac under the Rupay Scheme and accidental insurance
cover for accounts opened after 28-08-2018 is Rs. 2 lac.

iii. No minimum balance necessary.

iv. Effective Money Transfer in India.

v. Beneficiaries of government schemes in these accounts will receive Direct Benefit

Transfer.

vi. An overdraft facility will be allowed after satisfactory service of the account for 6 months.

vii. Expansion of banking, insurance and financial sectors.

viii. Maintain transparency, weed out fraud.

ix. Cut avenues for the production of black currency.

x. Remove the power of lenders of money & Ponzi schemes.

xi. More effective data collection & evaluation of results.

❏ CONS

i. There is a massive pressure on banks due to the elimination of the minimum balance. In
order to cover the overhead costs, maintenance costs, operating a branch, etc., banks should
have a minimum balance.

ii. The banks increased the minimum banks for the other saving bank accounts because of the
above factor.
 iii. There are still various uncertainties among people about the functioning of accounts. Few
crooked bankers pay for this.

iv. Questionable viability of banking, insurance accounts.

v. FRDI: FRDI has generated a lot of people 's uncertainty and misconceptions. The upper
limit of deposit insurance (100 percent secured) has not yet been listed by the Finance
Ministry. Money is being withdrawn from accounts now.

vi. Very little, almost no financial literacy.

vii. The overdraft facility might not be going well with the public.

viii. Most accounts that were opened under this scheme were dormant. Once the government
connects this scheme with other schemes such as MNREGA, this issue will be rectified.

ix. The public sector banking system has already been exhausted and workers have an extra
workload now.

x. People may be prone to cybercrimes that can impact the quality of their education.

xi. A lot of people lack documents that are required for banking activities.

PERSONAL OPINION & SUGGESTIONS

According to me, this initiative could be a huge success and could alter the face of this country
but it is a work in progress as it has potential to plug the leaks and boost the effectiveness of our
targeted public management programs.

The national services were mostly unorganized during the UPA regime, the cash from subsidies,
pensions, etc. was directly handed over. Due to this, counterfeit ration cards and fake gas cylinder
accounts etc. have been produced where the money is laundered. But, after this scheme, after the
accounts were linked with Aadhar cards, other government programs were standardized and all
the fake cards were found and deleted.

Needless to say, the affluent are more likely to have bank accounts in India than the poor, although
this difference has diminished. Similarly, as the number of rural bank account holders has doubled
in India since 2011, the rural-urban divide has narrowed, but the use of rural bank accounts is still
limited. Those active in the labor force are more likely to have bank accounts than those who are
not part of the labor force.

The PMJDY has delivered financial inclusion on three counts:

1. By giving lower-income households access to a secure investment product, they have led
to the financialization of savings. Deposits in these accounts have risen ten-fold in the last
four years, even though the number of account holders has risen only three-fold, suggesting
that current depositors in JDY frequently top up their balances.
2. The account offers vulnerable people a peek-in to other financial products, with 13.5 crore
beneficiaries registering for the low-cost accident insurance plan and 5.5 crore for life
cover.
3. With 27.7 crore account holders now armed with Rupay debit cards, their transition to
electronic payments has gotten a leg-up too. But now that JDY deposit flows are shoring
up banks’ CASA, the Centre must nudge them to offer much-needed loan products to these
account holders.

PM Modi tweeted on the completion of 6 years in the month of August, this year: "Thanks to the
Pradhan Mantri Jan Dhan Yojana, the future of several families has become secure. A high
proportion of beneficiaries are from rural areas and are women."

And therein lies the question: what does sahi vikas represent for financial inclusion? Very clearly,
as the end target, the poor don't want bank accounts. These are the means of greater access to the
structured system of financing and credit. Why then are they hesitant to use the centralized system's
free government-provided access?

The new government has put a technical and digital face on the same old programmes instead of
tackling genuine change. Bank workers and bureaucrats created fake accounts, or transformed
existing accounts into Jan Dhan accounts, under immense pressure from the top to meet new bank
account goals. These false and current accounts are projected to be roughly 10% of all new
accounts, which means that 90% of the accounts are for new recipients.

Poverty stricken households in India have to contend with money lenders who charge exorbitant
interest rates in the absence of access to formal credit. Access to bank accounts appears to have
had little influence on their dependency on lenders for private capital. Therefore, I think it is
important to allow them to develop a credit and transaction background in the banking system to
wean them away from the grasp of exorbitant money lenders who, when crises strike, extract a
high cost on their finances.
Using a dashboard approach to track the value and number of overdrafts sanctioned on the PMJDY
portal would be a good way to achieve this.

The Centre and the RBI also need to make sure that these first-time adopters are treated well at
bank branches, know the grievance redressal mechanisms and are aware of, and give them
protection from, the ramification of fraud or misuse of their accounts. The sharp spike in the JDY
account balances during the note ban months was a red flag on this score. The sharp spike in the
JDY account balances during the note ban months was a red flag on this score.

Rather than carrying on with account opening or deposit targets for banks on JDY, regulators must
now build up their education initiatives to make sure that JDY beneficiaries know their rights and
don’t fall prey to benami holders or money-launderers seeking to exploit their banking access.

Thus, neither of these opinions gives us a fair judgement of the scheme. However, though criticism
and appreciation abound, PMJDY seems to be the most effective financial inclusion program so
far without having a viable substitute.