Last-mile connectivity a bane for Jan Dhan scheme

Last-mile connectivity pangs have hobbled the Pradhan Mantri Jan Dhan Yojna (PMJDY) in several ways, according to a study by MicroSave for the finance ministry.

The scheme has helped improve financial inclusion. But insufficient income for banking correspondents (BCs) and a deficiency in training, supervision and infrastructure for these last-mile delivery agents have impeded the reach of the government's flagship scheme, said the survey.

A third of the accounts opened under the PMJDY were not the beneficiaries' first accounts. Only 47 per cent of the people with PMJDY accounts have received their RuPay debit cards, while these have been issued to 85 per cent of the beneficiaries. Customers don't trust the insurance products offered with the accounts. Confusion was rife among people that the interest bearing overdraft facility of Rs 5,000 was actually a dole that was yet to come, it said.

A non-remunerative and badly supervised last-mile service delivery system through banking correspondents was one of the key reasons for the flagship financial inclusion scheme failing on these parameters, the study said. "Customer account duplication, i.e., customers who hold another bank account in addition to PMJDY account, stands at 33 per cent. This is a significant increase from last two rounds of PMJDY survey and can be attributed to target-based account opening approach taken by banks."

MicroSave has conducted three rounds of surveys on the PMJDY - in December 2014, July 2015 and in December 2015 - giving a peek into the changing picture of the scheme's implementation.

Target-based attempt to open accounts led to confusion among people that the overdraft facility of Rs 5,000 was unhinged money the government would deposit once the accounts were opened. The confusion sowed by BCs, the study said, helped achieve higher targets but also led to consequent disappointment and contributed to slow off-take of the overdraft facility, which required 11-12 per cent interest repayment. The incentive also led to the creation of duplicate accounts.

The scheme has become relatively more efficient with a wider network of BCs, it said. But with the BCs' incentives linked to opening accounts tapering off now, it said, the government has to look at a more regulated last-mile eco-system, clarity on income and a much larger flow of funds from government schemes.

From the point of its first survey conducted in December 2014, the study said the percentage of transaction-ready banking correspondents has increased from 54 per cent to 81 per cent at the end of 2015. But dormancy was increasing among BCs; nearly three-fourths have complained that inadequate remuneration forced them to stay away from work. Average visits by customers to banking correspondents have stagnated and the poor numbers make it difficult to sustain the business.

Early signs of an ill-paid banking corresponding model, the study said, were reflected in the confusion over the facilities and duplication of accounts. "Customers have opened another PMJDY account under the misconception of receiving additional government benefits and overdraft facility. Every third account opened in the last three months (between October and December 2015) is a duplicate account," the report said.

But the scheme has seen an improvement in the savings behaviour of people; 86 per cent of those sampled have savings in banks against 77 per cent in July 2015.

Sluggish delivery of RuPay cards has hindered people from accessing all the benefits of the PMJDY. The cards are either delivered directly or to the nearest bank branches. In several places, the cards were found undelivered with the banks. "Factors such as long distance and unfriendly behaviour of link branches deter these low-value PMJDY customers from collecting RuPay card pin numbers from branches. On the other side, PMJDY customers who received RuPay card as well as PIN find it difficult to activate the cards and to keep it active after initial activation."

The study said, "Despite their success, the PMJDY (insurance and pension) schemes have not been able to build required trust among customers. The low trust can mostly be attributed to low scheme awareness and process inefficiencies."