Six yrs of Jan Dhan: Widening and deepening of financial inclusion in India

Deposits in bank accounts meant for the vulnerable now account for a higher share in overall demand deposits in Indian banks

The Modi government’s flagship scheme for financial inclusion has reached nearly 400 million beneficiaries as it completed six years of its implementation, the finance ministry said on Friday. Nearly 190 million people did not have a bank account in India in 2018. The Pradhan Mantri Jan Dhan Yojana (PMJDY) is likely to have considerably reduced the proportion of the unbanked. 
 
Deposits in these accounts—meant for those who would not have preferred to have a bank account if a minimum balance was mandatory—have grown six-fold in six years. 
 
But what stands out is that the share of these deposits in overall demand deposits in commercial banks has grown from 2.8 per cent after a year of the scheme’s completion, to 8.6 per cent now. This indicates that Jan Dhan account holders are now banking more frequently than before. 

At the same time, the share of inoperative accounts has also declined. Only 60 per cent of Jan Dhan accounts were operative in March 2017. The proportion has risen to 81 per cent in January 2020. 

“PMJDY has been the foundation stone of Modi government’s people-centric economic initiatives. Whether its direct benefit transfers, Covid-19 financial assistance, PM-KISAN, increased wages under MGNREGA, life and health insurance cover, the first step was to provide every adult with a bank account, which PMJDY has nearly completed,” finance minister Nirmala Sitharaman said in a tweet. 
 
Over the last six years, Jan Dhan accounts have extensively been used for implementation of various schemes. The average balance in PMJDY accounts has increased from Rs 1,279 in August 2015 to Rs 3,239 on August 19, 2020, growing 2.5 times in five years. 

But at the same time, the proportion of these accounts being given RuPay debit cards has reduced. While more than 80 per cent of account holders had debit cards based on the indigenously developed payments system technology in 2015 and 2016, the proportion has fallen to 74 per cent in August 2020. 
 
The PMJDY was launched in August 2014, after PM Narendra Modi announced it in his first Independence Day speech, with an aim to bank all households in India. In 2018, the ambit was expanded to include all adults in India. 

These special basic savings bank accounts come with an accidental insurance cover of Rs 200,000 and also with an overdraft facility with an upper limit of Rs 10,000.