Budget 2018: Govt to extend Modi's flagship PMJDY scheme, double overdraft

Prime Minister Narendra Modi's flagship programme, the Pradhan Mantri Jan-Dhan Yojana (PMJDY), which completed three years in August last year and was credited by Finance Minister Arun Jaitley for unleashing the "JAM" -- Jan Dhan, Aadhaar, Mobile -- revolution, is set to receive an extension in Budget 2018, which is just days away. The financial inclusion scheme could also reportedly see the overdraft amount sanctioned under it double as the government looks to use it to promote entrepreneurship by providing bank loans. 

A senior government official told financial daily The Economic Times that during Budget 2018, an announcement on PMJDY being extended is expected. The unnamed official added that an increase in the overdraft amount under the scheme could also be on the cards. Stating that the government was looking to "build upon" the scheme, the official told the financial daily that it was also going to "bundle other financial products" under PMJDY, which will see its second phase end in August. 

Currently, under PMJDY, one account, preferably belonging to a woman, in every household can avail of an overdraft of Rs 5,000 once the account has been satisfactorily operated for six months. According to the financial daily, this amount could be doubled to Rs 10,000 in order to allow access to easy emergency funds. The above-mentioned government official told the financial daily that such a move was "being discussed" and the overdraft amount could be "doubled" for those accounts that are "receiving direct benefit transfer through one or more schemes". 

Originally envisioned for providing financial inclusion to all Indian citizens by ensuring that at least one person from every household possesses a bank account, the PMJDY scheme is also being seen by the government as a vehicle for promoting entrepreneurship. According to the financial daily, the government plans to push lenders to provide entrepreneurship a boost using the good operative accounts.

Modi's flagship financial inclusion scheme:

The stated objective of the ambitious scheme is to bring society's excluded sections under the formal financial system's umbrella. 

As of October last year, close to 300 million (30 crore) people had opened accounts under the scheme, which was launched in 2014 by PM Modi. At present, according to the latest data available on the PMJDY site, 309.7 million (30.97 crore) beneficiaries have banked under the scheme, the beneficiary accounts hold a balance of Rs 736.90 billion (73,689.72 crore), and 126,000 (1.26 lakh) Bank Mitras are delivering branch-less banking services in sub-service areas.

As of August last year, 60 per cent of the accounts opened under the scheme belonged to people living in rural and semi-urban areas. 

However, the scheme was only one part of the government's strategy to ensure financial inclusion. Subsequently, the government also brought in other financial products, such as life insurance. Another initiative launched by the government in this regard is Mudra, which aims to provide credit to micro enterprises. 

As of August last year, gross enrolment under the Pradhan Mantri Jeevan Jyoti Bima Yojana and the Pradhan Mantri Suraksha Bima Yojana had hit 34 million and 109 million, respectively. 

Last year, Finance Minster Jaitley praised the PMJDY scheme, crediting it with ushering in the "JAM", or Jan Dhan, Aadhaar and Mobile, revolution. 

JAM, according to Jaitley, was nothing short of a social revolution as it has brought together biometric identification (Aadhaar), financial inclusion (PMJDY), and mobile telecommunications.  

As of September last year, according to Jaitley, zero balance accounts under the PMJDY have come down to 20 per cent from 77 per cent in three years.