 "Almost two decades after business correspondents (BCs) arrived on the scene, the lack of grease is evident. Poor payout for the heavy lifting they do is is making the channel – a key cog in the financial inclusion wheel – creaky. For there has been n")
On August 6, at the post-monetary policy interaction with the media, Reserve Bank of India (RBI) Governor Sanjay Malhotra spoke about serving the interest and welfare of citizens, including those at the bottom of the pyramid.
He said: “Let me underline that for us, at RBI, the interest and welfare of the citizens of India is foremost. It is the people of India, including those at the bottom of the pyramid, who are raison d’etre or the reason for our being.”
He followed this up by directing banks to organise camps for the renewal of know your customer (re-KYC) for Jan Dhan accounts, and micro insurance and pension schemes.
Re-KYC is the process of updating customer information. It ensures that banks have current data of their customers. This is crucial for maintaining security and compliance with regulatory standards.
Banks had started organising such camps in July and will continue to do so till the end of September in an effort to provide services at customers’ doorsteps. Apart from re-KYC and opening new bank accounts, these camps are focusing on micro insurance and pension schemes for financial inclusion and to redress customer grievances.
Since Jan Dhan accounts are perceived to be low-risk accounts, banks are required to re-KYC for such accounts once in 10 years. Many of these accounts were opened in the initial years, after the Pradhan Mantri Jan-Dhan Yojana (PMJDY) was launched on August 28, 2024. In the first week, 18 million bank accounts were opened. Many accounts have slipped into the dormant category; they need to be activated to ensure the account holders are not deprived of the benefits.
An account turns dormant when it is inactive for an extended period, often over a year. To revive it, one needs to deposit or withdraw money. Banks mark accounts as dormant to prevent unauthorised activity if the account owner forgets about them.
Since Independence, India has covered a lot of ground to expand the formal banking network. On July 19, 1969, 14 banks with 85 per cent of the country’s total deposits were nationalised. Another six banks were nationalised in the second round in 1980. With that, 91 per cent of the banking industry was then owned by the government.
Before nationalisation, privately owned banks mobilised savings and channelled money mostly for large business houses. A vast section of the population did not have access to banking – neither for credit nor for saving.
Indeed, bank nationalisation sowed the seeds for expanding the banking network to reach many more people, but it couldn’t quite turn the landscape into a rainforest. The dream of one branch for every 10,000 people remained a distant one till the ’80s.
PMJDY proved to be the game changer. It’s a financial inclusion programme of the government that aims to expand affordable access to financial services such as bank accounts, remittances, credit, insurance and pensions. Prime Minister Narendra Modi announced this scheme in his first Independence Day speech on August 15, 2014.
On the inauguration day itself, 15 million bank accounts were opened, and in the first week, 18 million, creating a Guinness World Record for most bank accounts opened in one week.
A decade later, the total number of PMJDY accounts in the first week of August 2025 stood at 561 million. Collectively, these accounts make for Rs 2.64 trillion, with an average account balance of Rs 4,726. The number of RuPay credit cards issued to such beneficiaries is 385.9 million. Linking RuPay cards to PMJDY accounts had multiplied digital transactions.
Public sector banks have played a spectacular role in this movement. They have opened 435.1 million accounts – 77.55 per cent of the total PMJDY accounts; followed by regional rural banks (105.6 million; 18.80 per cent), private banks (18.4 million; 3.30 per cent), and rural cooperative banks (around 1 million; 0.35 per cent).
PMJDY beneficiaries outnumber the combined population of a large part of Europe including Russia (part of which is in Asia), Türkiye, Germany, France, United Kingdom, Italy, Spain and Poland.
But the number of accounts alone doesn’t tell the real story. Of the total PMJDY accounts, 66.75 per cent, or 374.4 million, are in rural and semi-urban India, and 33.25 per cent (186.6 million) are in urban India. Importantly, women outnumber men as beneficiaries. There were 312.7 million (55.70 per cent) women beneficiaries in the first week of August.
The PMJDY is the main driver of the much-talked-about JAM trinity – Jan-Dhan-Aadhaar-mobile – that has been transforming Indian banking. Jan Dhan accounts are the wallets, Aadhaar ensures that each recipient is legitimate, and mobile phones are the delivery vehicles. Apart from handheld mobile devices, QR codes and point of sales (POS) have helped in facilitating smooth transactions in PMJDY accounts.
Together, they have enabled direct benefit transfers (DBT) that deliver subsidies and welfare with laser precision — no middlemen, no leakage. The DBT coverage exploded from 28 schemes in 2013-14 to 323 schemes in 2024-25, and the quantum of funds transferred zoomed almost 10-fold during this period – from Rs 7,400 crore to close to Rs 7 trillion.
A contributing factor to the growth of digital transactions is the RuPay card. The 386.8 million such cards issued under the PMJDY scheme, the installation of millions of POS machines, and the mobile-based payment system have together boosted the financial inclusion drive. On an average, a bank’s branch now serves 7,100 people.
Looking at its journey, can we call PMJDY a resounding success? Well, there are a few issues that need sorting:
- Dormant accounts: As of January 2025, 21.17 per cent of PMJDY accounts were inactive (they had seen no customer-induced activity in at least two years). There are many reasons for this. One could be migration from rural to urban India.
- Multiple accounts per person: There have been many such instances. Many such accounts run the risk of turning into mule accounts, which fraudsters use for money laundering and other illegal activities. There have been media reports on accounts being auctioned by individuals to fraudsters for this purpose. A press release by the Central Bureau of Investigation in June 2025 said there were around 850,000 mule accounts linked to at least 700 bank branches across India. While it did not state whether these were PMJDY accounts, bankers say such account-holders are easy prey for fraudsters.
- Cost per account: Every account has an operational cost for the bank. Inactive accounts are like a subscription you forgot to cancel— and get charged for that. They have inbuilt cost in terms of manpower, system expenses and overhead cost in the branches.
- Insurance coverage: As of April 2025, 236.3 million PMJDY accounts are covered by the Pradhan Mantri Jeevan Jyoti Bima Yojana (offers micro life insurance) and 510 million by the Pradhan Mantri Suraksha Bima Yojana (insurance for accidental coverage). Until recently, many customers did not make claims since they didn’t know they were covered by such schemes. They also didn’t know why the money was being deducted from their accounts. Banks have started addressing these issues seriously.
Rural folks, particularly women, are finally in the financial loop and the government welfare is more efficient, transparent and leak-free. Banks can open accounts, but they can’t create income. If rural income doesn’t grow, account usage lags, there is no flow of money, and many accounts go dormant. The solution lies in creating jobs. That’s a different story, but no one can argue that PMJDY’s success has been a catalyst for financial inclusion.
The writer is an author and senior advisor to Jana Small Finance Bank Ltd. His latest book: Roller Coaster: An Affair with Banking. To read his previous columns, log on to www.bankerstrust.in. X: @TamalBandyo
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
