Data: 10 Years of PMJDY – As Average Deposits Increase, Share of Inoperative & Zero Balance Accounts Reduces

Pradhan Mantri Jan-Dhan Yojana_image

The NDA government’s flagship financial inclusion scheme, the Pradhan Mantri Jan Dhan Yojana recently completed 10 years of implementation. Data indicates that over the last 10 years, while average deposits have steadily increased, the share of inoperative and zero balance accounts has reduced.

On 28 August 2014, the Government of India (GoI) launched the world’s largest financial inclusion initiative, the Pradhan Mantri Jan Dhan Yojana (PMJDY). This scheme aims to ensure that every individual in India without a bank account gains access to essential financial services. It focuses on providing affordable access to basic savings and deposit accounts, access to need-based credit, remittance facilities, insurance, and pensions to underserved and low-income groups. Additionally, the scheme offers accident insurance coverage of up to Rs. 2 lakhs and an overdraft facility of up to Rs.10,000 for eligible account holders. The PMJDY also includes a financial literacy program to encourage savings, the use of ATMs, and mobile banking.

Key features of the PMJDY scheme include:

PMJDY has also earned recognition from the Guinness Book of World Records. The record acknowledges that the “Most bank accounts opened in one week as part of the Financial Inclusion Campaign” were 1,80,96,130 accounts. This achievement was realized by the Department of Financial Services, Government of India, between 23 August and 29 August 2014, around the time the scheme was launched.

More than 53 crore accounts have been opened under PMJDY in 10 years of implementation

Recently, the PMJDY scheme completed a decade of implementation. Since its inception, the PMJDY has seen the opening of over 53 crore accounts. In its first year alone, nearly 18 crore Jan Dhan accounts were established, and the total number has since grown nearly threefold. Since March 2024, over 1.32 crore accounts have been opened, as of 28 August 2024. Reportedly, the government’s target is to open more than 3 crore PMJDY accounts during 2024-25.

When the scheme was first launched, it aimed to ensure that every household was covered, and it has achieved nearly 100% coverage across all states and union territories, as per the government’s statements. Since 2018, however, the government has broadened the scheme’s focus to include ‘Every Unbanked Adult’ and has enhanced the benefits, such as increasing the overdraft facility and accidental insurance coverage.

Total deposits grow by 14 times between 2014 and 2024

As per the press release highlighting the achievements of the scheme after a decade of implementation, total deposits grew about 14 times, increasing from Rs. 15,640.6 crores in 2015 to Rs. 2.32 lakh crores by March 2024. As of August 2024, this had dropped to Rs. 2.28 lakh crores.

A significant surge in deposits occurred between March 2020 and March 2021 first, where deposits jumped from Rs. 1.18 lakh crores to Rs. 1.46 lakh crores, potentially indicating an impact of direct cash transfer and other benefits extended by the governments during the COVID-19 pandemic. Further, between March 2022 and March 2024, the total deposits increased by at least Rs. 30,000 crores each year.

Similarly, the average deposit per account has also increased steadily. It was about Rs. 1,076 in March 2015 and reached Rs. 4,279 by August 2024, increasing by about 4 times. As in the case of total deposits, the average deposits saw the largest increases between March 2020 and March 2021 and between March 2023 and March 2024.

Further, as of 28 August 2024, the average deposit across states varies widely from Rs. 2,500 in states like Manipur and Assam to Rs. 8,000 in Goa. The average is more than Rs.10,000 in Ladakh and Lakshadweep too. The states/UTs in the northern region such as Himachal Pradesh (Rs. 7,368.06), Jammu & Kashmir (Rs. 6,486.06), and Haryana (Rs. 6,283.12) have a higher average deposit as per data on 28 August 2024. In contrast, the deposits in the south Indian and northeastern states are lower. The average deposit is less than Rs.3,000 in Andhra Pradesh and between Rs.3,000 and 4,000 in Telangana, Bihar, and Tamil Nadu. The amounts on a particular date may not provide adequate information on the trends and the reasons behind such variations across states.

Average deposit per account is higher in regional rural banks

Across the different types of banks, the average deposit across major private banks was Rs. 4,099 while that across all public sector banks was Rs. 4,250. The average deposit was the highest in regional rural banks with Rs. 4,511. The range of average deposits in major private banks shows a high variation, from Rs. 1,325 in Kotak Mahindra Bank Ltd. to Rs.6,152 in HDFC Bank Ltd. and Rs. 7,463 in Jammu and Kashmir Bank Ltd.

Share of inoperative PMJDY accounts down from 40% to 20%

PMJDY is frequently scrutinized for issues related to inoperative and zero-balance accounts. A notable concern is the high number of inoperative accounts. As per Reserve Bank of India guidelines, a savings as well as a current account should be treated as inoperative/ dormant, if there are no customer-induced transactions in the account for two years. A total of 10.34 crore accounts out of 51.11 crore accounts were inoperative as of 6 December 2023 and about 4.93 crore of these accounts belonged to women, as per a response in parliament in December 2023. In other words, about 20% of the accounts were inoperative and about 47.8% of these belonged to women. Further, these inoperative accounts had Rs. 12,779 crores or 6.12% of total deposits. In March 2017, nearly 40% of the accounts were inoperative from which the number has dropped to 20% in 2023. However, still, a significant portion of account holders are not engaging with their accounts regularly.

Only about 8% of the accounts have zero balance

Additionally, although the provision of zero-balance accounts is a hallmark of PMJDY, data from different sources suggest that about 8% of these accounts still maintain a zero balance in the last few years. This suggests that while many accounts have been opened, they are not being actively used for savings or transactions, potentially undermining the scheme’s objectives. However, from about 7 in 10 accounts opened that had a zero balance as of December 2014, the share has dropped steadily over the years.

Challenges in PMJDY include gaps in awareness and poor digital connectivity

While PMJDY represents a significant advancement in financial inclusion by bringing lakhs of people into the formal banking system, several challenges have impacted its effective implementation as highlighted by different studies in the past. Issues such as poor digital connectivity, inadequate infrastructure, and networking problems hinder the scheme’s reach and complicate the provision of banking services in remote and underserved areas. Additionally, despite financial literacy being a key objective of the scheme, there were gaps in awareness regarding account opening procedures, operational aspects, and the benefits available. Studies have revealed instances of duplication, where individuals have opened PMJDY accounts while simultaneously operating other bank accounts. It should be noted that most of these studies were conducted in the first five years of the scheme’s implementation.

While PMJDY has undoubtedly improved access to basic banking services for the unbanked, a key focus moving forward must be ensuring that account holders engage more actively with the broader financial system to access credit, and insurance products among other financial services. Future initiatives should concentrate on facilitating this deeper engagement to improve access of this section of the population to major financial services.