The Pradhan Mantri Jan-Dhan Yojana (PMJDY) is one of the prestigious schemes of the current government. PMJDY is a type of Basic Savings Bank Deposit Account (BSBDA) with no minimum balance requirement. Here is a review of the 7 years of PMJDY.
The Pradhan Mantri Jan-Dhan Yojana (PMJDY) is a nationwide social security scheme launched by the Government of India in August 2014 to ensure financial inclusion of every individual who does not have a bank account in India. The objective of the scheme is to ensure access to various financial services like availability of basic savings and deposit bank account, access to need-based credit, remittances facility, insurance and pension to the weaker sections and low-income groups, in an affordable manner. In addition, the scheme also provides an accident insurance cover of up to Rs. 2 Lakhs and an overdraft facility up to Rs. 10,000 to eligible account holders. Further, the scheme also envisaged financial literacy program to promote savings, use of ATMs, using mobile phones for banking, among others.
PMJDY extends insurance and OD benefits
The main features of the PMJDY scheme are
- Opening of one basic savings bank account for an unbanked person
- No minimum balance requirement
- Deposit in accounts is paid interest
- RuPay Debit card is provided to the account holder
- Accident Insurance Cover of Rs.1 lakh (Rs. 2 lakhs for new PMJDY accounts opened after 28 August 2018) is available with a RuPay card issued to the account holder
- Eligible account holders are provided an overdraft (OD) facility up to Rs. 10,000
- Accounts are eligible for Direct Benefit Transfer (DBT), Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY), Atal Pension Yojana (APY), Micro Units Development & Refinance Agency Bank (MUDRA) scheme of the government
More than 43 crore accounts have been opened under PMJDY
Recently, the PMJDY scheme completed seven years of implementation. In these seven years, the number of accounts opened under the scheme has crossed 43 crores. In the last year, over 2.6 crore Jan Dhan accounts have been opened. In the first year of implementation of the scheme, over 17.9 crore PMJDY accounts were opened. Between August 2017 & 2018, only about 2.45 crore accounts were opened. In the following year, between August 2018 & 2019, over 4.25 crore accounts were opened. This could be attributed to the modifications made to the scheme in 2018.
Initially, when the scheme was rolled out, the target was to cover every household. According to PMJDY’s progress report, almost 100% of household coverage has been recorded in all the states/UTs. However, since 2018, the government decided to extend the scheme to ‘Every Unbanked Adult’ and increased the free accidental insurance cover on RuPay cards from Rs.1 Lakh to Rs. 2 lakh for PMJDY accounts opened after 28 August 2018. Further, the Overdraft (OD) limit was also doubled from Rs. 5,000 to Rs. 10,000 and facility of OD up to Rs. 2,000 without conditions was brought in.
Two-thirds of BSBDAs are PMJDY accounts
PMJDY is developed upon the Basic Savings Bank Deposit Account (BSBDA) introduced by RBI in August 2012. Both BSBDA and PMJDY have the same broad goal- Financial Inclusion. However, unlike the PMJDY, BSBDA can be opened by anyone, irrespective of their income.
At the same time, there are also similarities in both these account types. Like PMJDY, BSBDA does not require maintenance of any minimum balance and is a full-KYC basic banking account. With the introduction of PMJDY, the number of BSBDAs has grown significantly. Data from a study undertaken using RBI Annual Reports and PMJDY’s Progress report shows that as of December 2020, there are over 64.9 crore BSBDAs including 41.58 crore PMJDY accounts. In other words, 64% of the BSBD accounts are PMJDY accounts. The annual addition of BSBD accounts is given in the following chart. It should be noted that between 2016-17 and 2019-20, about 3.5 crore non-PMJDY BSBD accounts were closed.
The average deposit per Jan Dhan account has increased almost 3 times
Of the 43 crores Jan Dhan accounts opened as of August 2021, more than 55% (over 23.87 crores) Jan Dhan accounts are held by women and nearly 67% (over 28.7 crores) account holders in rural and semi-urban areas. As of August 2021, the total deposit balances under PMJDY accounts stand at Rs. 1,46,230 crores. From the first year of PMJDY, the deposits have increased about 6.38 times. The average deposit per Jan Dhan account has gone up 2.7 times from Rs. 1,279 in August 2015 to Rs. 3,398 in August 2021.
As of 01 September 2021, the maximum number of beneficiaries are from Uttar Pradesh with over 7.36 crore account holders followed by Bihar with over 4.92 crore account holders. West Bengal has nearly 4.25 crore account holders while Madhya Pradesh has over 2.61 crore account holders. Maharashtra and Rajasthan also have more than 3 crore account holders each. Altogether, these six states together accounted for almost 61% of the Jan Dhan account holders in the country as of September 2021.
The average deposit in 25 states is higher than the national average
The average deposit per Jan Dhan account across states varies from Rs. 2,072 in Manipur to Rs. 6,838 in Goa. The average deposit is the highest, Rs. 19,174 per account, in Lakshadweep where there are only 6,060 Jan Dhan accounts. A total of 25 states/UTs have an average deposit greater than the national average. Goa and Himachal Pradesh are the only states with an average deposit of more than Rs. 6,000 per Jan Dhan account. Sikkim, Uttarakhand, Meghalaya, Haryana, and Arunachal Pradesh are the states with an average deposit of more than Rs. 5,000 per account. The average deposit in 9 states is below Rs. 3,000. These states are Manipur, Assam, Madhya Pradesh, Telangana, Tamil Nadu, Nagaland, Bihar, Andhra Pradesh, and Chhattisgarh.
The accounts under PMJDY can have zero balance. Since averages are calculated as the ratio of total deposit to the total number of accounts opened, the actual number of accounts without any balance is not known.
Multiple challenges in the effective implementation of PMJDY
While PMJDY is a huge step forward to ensure financial inclusion, many challenges have impeded the effective implementation of the scheme. Poor digital connectivity, lack of infrastructure, networking issues, are some of the basic setbacks that not only hinder the implementation of the scheme, but also make it difficult to provide the required banking services in every nook and corner of the country.
Though financial literacy is one of the scheme’s objectives, lack of awareness with respect to the procedures in opening and operating an account, and available benefits continue to exist which need to be addressed. Studies also show that duplication is evident- there were people who opened a PMJDY account though they operated another bank account.
Dormancy or inoperative accounts is another concern. According to the Reserve Bank of India’s Master Circular from July 2015, every year, the banks must conduct a review of accounts which are not being operated and approach the customer to ascertain the reason behind inactivity. If there has been no transaction in the savings account, for over two years, including PMJDY accounts, it is considered inoperative/dormant.
Proportion of inoperative accounts has reduced over the years
Over 24% of the PMJDY accounts were inoperative as of August 2017. In August 2018 and August 2019, over 19.1% and 18% of the accounts were inoperative respectively. In August 2020, the percentage of inoperative accounts dropped to 13.7% because of the deposit of Rs. 500 per month for three months (April to June 2020) to the accounts of women Jan Dhan account holders under PM Garib Kalyan Yojana. A total of 20.64 crore women account holders benefited under the scheme. A total of Rs. 30,944.99 crores were credited to beneficiaries’ accounts. As on 28 July 2021, 14% of the Jan Dhan accounts were inoperative.
State-wise data shows that Goa and Mizoram had the highest proportion of inoperative PMJDY accounts as on 25 March 2020 with 33% accounts being inoperative. On the other hand, the proportion was the lowest in Tripura with 6% accounts being inactive. However, as on 28 July 2021, the data shows that in almost all states, the proportion of inoperative accounts has dropped by 4 percentage points on an average. Telangana recorded a drop in inoperative accounts from 19% to 10% while Kerala and Maharashtra reported a drop by 8 percentage points. Exceptions do exist. Mizoram witnessed an increase in inoperative accounts by 14 percentage points while Delhi and Haryana witnessed an increase by 1 and 2 percentage points respectively.
There is no doubt that PMJDY has immensely helped in extending basic bank account to the unbanked. However, all these account holders also need to engage with the extended larger financial system to avail other benefits such as loans, insurance products etc. The focus of the initiatives could be in this direction.
Featured Image: Pradhan Mantri Jan-Dhan Yojana