Banks go slow on issuing overdraft in PMJDY accounts

Infrequent transactions, lack of enough balance reasons for slow issuances of overdraft

The overdraft facility under the Pradhan Mantri Jan Dhan Yojana (PMJDY) has seen very few disbursements, say bankers.

Insufficient balance in the accounts and infrequent transactions by the account holders have made banks wary of issuing the overdraft facility. Under this facility, lenders can extend up to Rs 5,000 to a customer who has opened accounts under the PMJDY scheme.

However, banks are free to decide on who makes for an eligible customer, even though some basic criteria has been laid down. According to a government circular, the account should be operational for at least six months, the applicant should be aged between 18-60 years, and the account should be seeded with Aadhaar.

Bankers say they’re willing to lend, but there are very few account holders who meet the required criteria of having a good transaction track record. “In a month, there should at least be a few debits and credits which can help in ascertaining that the consumer has a source of income and has a banking habit. Essentially, the bank needs to be satisfied with the transaction history which really hasn’t been the case so far,” said a public sector banker requesting anonymity.

Agreeing with this view, another banker said: “Even though the direct benefit transfer has started flowing in through these accounts, they still remain very inactive. As a result, it becomes difficult to assess their (account holders’) repayment capability and so we haven’t seen many overdraft issuances.”

When the Jan Dhan accounts were opened, there was said to be a misunderstanding among customers that they wouldn’t have to return the money. Another banker from a private bank said this misconception had made them more stringently evaluate the accounts and the consumers, leading to a low take-off in the overdraft facility.

According to the PMJDY website, 178.9 million accounts have been opened under this scheme as of August 26, but as many as 45 per cent of them were inactive.