PRADHAN MANTRI JANDHAN YOJANA

30.08.2024

PRADHAN MANTRI JANDHAN YOJANA

IN NEWS –

• The launch of the Pradhan Mantri Jan Dhan Yojana on August 28, 2014 was a significant step by the government in its concerted attempt to bring the unbanked sections of the population into the ambit of the formal financial system.
• As the scheme completed 10 years recently, Prime Minister Narendra Modi hailed the ‘momentous ‘achievement of the scheme.
• The prime minister held that the scheme was paramount in boosting financial inclusion and giving dignity to crores of people, especially women, youth, and the marginalised communities.

ABOUT PMJDY

Pradhan Mantri Jan-Dhan Yojana (PMJDY) is National Mission for Financial Inclusion to ensure access to financial services, namely, Banking/ Savings & Deposit Accounts, Remittance, Credit, Insurance, Pension in an affordable manner.

Objectives

• Ensure access of financial products & services at an affordable cost.
• Use of technology to lower cost & widen reach.
• Banking the unbanked – Opening of basic savings bank deposit (BSBD) account with minimal paperwork, relaxed KYC, e-KYC, account opening in camp mode, zero balance & zero charges.
• Securing the unsecured – Issuance of Indigenous Debit cards for cash withdrawals & payments at merchant locations, with free accident insurance coverage of Rs. 2 lakhs.
• Funding the unfunded – Other financial products like micro-insurance, overdraft for consumption, micro-pension & micro-credit

SIX PILLARS OF PMJDY

• Universal access to banking services – Branch and BC
• Basic savings bank accounts with overdraft facility of Rs. 10,000/- to every household
• Financial Literacy Program– Promoting savings, use of ATMs, getting ready for credit, availing insurance and pensions, using basic mobile phones for banking
• Creation of Credit Guarantee Fund – To provide banks some guarantee against defaults
• Insurance – Accident cover up to Rs. 1,00,000 and life cover of   Rs. 30,000 on account opened between 15 Aug 2014 to 31 January 2015
• Pension scheme for Unorganized sector

KEY FEATURES OF THE SCHEME

1. ACCOUNT ACCESSIBILTY – Pradhan Mantri Jan Dhan Yojana (PMJDY) aims to ensure that every household has at least one bank account.

1. ZERO BALANCE ACCOUNTS – The accounts under PMJDY can be opened without the need for a minimum balance. This makes it easier for low-income individuals to access banking services. These accounts earn interest on deposits like a regular account.
2. OVERDRAFT FACILTY – The account holders are eligible for an overdraft facility of up to Rs.10,000. It is specifically aimed at women account holders.
3. ACCIDENT INSURANCE COVER – Accident Insurance Cover of Rs.1 lakh is available with Ru Pay card issued to the PMJDY account holders.
4. DIRECT BENEFIT TRANSFER – PMJDY accounts are also eligible for Direct Benefit Transfers (DBT), Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY), Atal Pension Yojana (APY), and the Micro Units Development & Refinance Agency Bank (MUDRA) scheme.
5. FINANCIAL LITERACY – The scheme focuses on promoting financial literacy among account holders.
6. BANK MITRAS – The scheme employs Bank Mitras (bank representatives) to enhance accessibility of the scheme. These Bank Mitras provide branchless banking services across the country, especially in rural and remote areas.

CHALLENGES ASSOCIATED WITH THE SCHEME

1. Account Dormancy and inactivity- Despite the high number of accounts opened (over 53 crore by 2023), many accounts remain dormant and inactive. 

For ex- According to a report, ~86.3% of PMJDY accounts are operational. This suggests that a significant portion of accounts opened remain dormant.

2. Use as mule accounts- There concerns regarding the use of PMJDY accounts as mule accounts in fraudulent activities, such as money laundering or storage of black money. 

3. Infrastructural Issues- According to KPMG report, the inadequacy of physical and digital infrastructure, particularly in rural areas, has hindered the ability of account holders to perform transactions. 

For ex- Lack of bank branches or functional ATM in villages of states like Bihar and Uttar Pradesh.

4. Technological Barriers- Poor internet connectivity and inadequate banking technology has affected the effective management of banking services for remote Jan Dhan account holders.

5. Lack of Financial literacy- The lack of financial literacy among beneficiaries is a critical barrier in the effective implementation of Pradhan Mantri Jan Dhan Yojana (PMJDY). 

For ex- Unawareness about overdraft facilities and insurance cover provided for beneficiaries under PMJDY.

6. Duplication of Accounts- The opening of multiple Jan Dhan accounts under different schemes complicates data management and skews the understanding of the actual number of beneficiaries.

7. Exclusion of Certain Populations- Certain marginalised groups, including tribal populations and people living in extremely remote areas, remain excluded from the scheme due to social and geographical barriers. 

For ex- Low Banking penetration in the tribal regions of Chhattisgarh and Jharkhand.

8. Gender Disparity- Women in some conservative rural areas are less likely to use PMJDY accounts independently due to social norms. This restricts their mobility and financial autonomy.

WAY FORWARD

1. Enhancement of Financial Literacy- Implementation of widespread financial literacy campaigns, in partnership with local community leaders, NGOs, and educational institutions will promote financial literacy and better use of Jan Dhan Accounts.

2. Encouragement of active use of accounts- The active use of PMJDY accounts should be incentivized by linking them with various government schemes, subsidies, and benefits. 

3. Greater Integration of Financial Services- The integration of financial services like microcredit, pension, insurance products with the Jan Dhan accounts will help in encouraging the active use of Jan Dhan accounts.

4. Improvement of Banking Infrastructure- Expansion of the banking network, particularly in underserved rural and remote areas, by setting up more branches, ATMs, and digital banking touchpoints. Encouragement of the use of Business Correspondents (BCs) and mobile banking units to reach remote areas, will further deepen the process of financial inclusion.

5. Regular Monitoring and Feedback Mechanism- Establishment of a system for regular monitoring and evaluation of the PMJDY’s progress, and collection of feedback from beneficiaries to identify areas for improvement will ensure that the scheme adapts to changing needs.