Why in the News?
The Pradhan Mantri Jan-Dhan Yojana (PMJDY) enters its tenth year in 2024. On August 28, 2014, PMJDY was introduced, marking a decade of operation.
Over 3 crore accounts under the PMJDY are to be opened by the government during the current fiscal year 2024–2025.
Achievements of Pradhan Mantri Jan-Dhan Yojana :
- Account Expansion: In March 2024, PMJDY had 520 million accounts, a massive increase from its humble beginnings of 147 million accounts in March 2015.
- Deposit Mobilization: In March 2015, deposits totaled Rs 15,600 crore, and by March 2024, they had risen to Rs 2.32 trillion.
o Over the previous ten years, the deposit mobilization increased at a compound average growth rate of 30%.
o The average balance nearly quadrupled in the last ten years, rising from Rs 1,065 in March 2015 to Rs 4,476 in March 2024. - Expansion of Banking Infra: The Jan Dhan Darshak (JDD) App has over 1.3 million banking touchpoints mapped on it, indicating the expansion of the banking infrastructure.
As of July 2023, the JDD app has 601,000 villages mapped. Of these, banking establishments (bank branches, banking corners, or Indian Post Payment Banks within a 5-kilometer radius) cover 599,468 (99.7%) of all the plotted villages.
A smartphone app called the Jan Dhan Darshak App assists people in finding financial touchpoints including branches, ATMs, financial Correspondents (BCs), IPPBs, etc. - Urban-Rural Parity: The Ministry of Finance reports that PMJDY has reached a significant milestone, with a total of 53.13 crores of PMJDY accounts, of which 55.6% (29.56 crores) are rural-urban parity. Women make up 66.6% of Jan-Dhan account holders ($35.37 crores). Rural and semi-urban areas are home to Jan Dhan accounts.
- Growth in Digital Payments: From 920 million in the Financial Year (FY) 2018 to 131.2 billion in FY 2024, there has been a total increase in UPI financial transactions.
Similar to this, there were 1.26 billion RuPay card transactions overall in FY 2023 compared to 670 million in FY 2018 at point of sale (PoS) and e-commerce. - Direct Benefit Transfer (DBT): Through 312 major programs, PMJDY directly gave beneficiaries from 53 central government departments around USD 361 billion.
o Under the Pradhan Mantri Garib Kalyan Yojana (PMGKY), the PMJDY accounts played a key role in the one-time ex gratia payment of Rs 500 per month for three months (April, May, and June 2020), benefiting 206.4 million women who held PMJDY accounts during COVID-19. - Overdraft (OD) Accounts: As of March 2024, 1,17,701 overdraft accounts had been opened, and these PMJDY account holders had been granted access to a sanctioned sum of Rs 190 crore. The utilization maximum is 80.5%.
o It has guaranteed the poorest of the poor access to loans from the official banking system. - Low Zero Balance Accounts: Only 8.4% of accounts have a zero balance, even though PMJDY permits zero balance accounts and minimum balance maintenance is not required.
- The World Bank has praised India, saying that in just six years, the country has accomplished what would have taken fifty years.
- The financial inclusion rate of adults has increased to 80% from 25% in 2008 thanks to the Jan Dhan, Adhaar, and Mobile (JAM) trinity. This progress has been made possible by Digital Public Infrastructure (DPI), which has shortened the journey by up to 47 years.
What is PMJDY?
PMJDY is a financial inclusion initiative that seeks to guarantee reasonably priced access to financial services, such as basic savings and deposit accounts, remittance, credit, insurance, and pensions.
Individuals without any other accounts are eligible to open a basic savings bank deposit (BSBD) account at any bank branch or Business Correspondent (Bank Mitra) outlet under the plan.
Features:
o No Minimum Balance: PMJDY accounts do not need to have a minimum balance maintained.
o Free Debit Card: PMJDY account customers are given a free Rupay debit card.
o Accident Insurance: With a RuPay card that is provided to PMJDY account holders, accident insurance coverage of Rs. 1 lakh (upgraded to Rs. 2 lakh for new accounts opened in 2018) is available.
o OD Facility: Eligible account holders may access an overdraft (OD) facility up to Rs. 10,000.
o DBT Benefits: PMJDY accounts are qualified for the Micro Units Development & Refinance Agency Bank (MUDRA) scheme, Atal Pension Yojana (APY), Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), and Pradhan Mantri Suraksha Bima Yojana (PMSBY).
However, a PMJDY account does not automatically come with a free chequebook. On PMJDY accounts, banks can issue chequebooks, which may or may not be priced.
Challenges with PMJDY :
Numerous Accounts:
People open numerous accounts in various banks using different identity documents, such as their PAN card or Aadhaar card, due to the allure of big insurance coverage, accidental death benefit coverage, and overdraft capacity.
- Burden on Banks: Banks face financial difficulties in handling an excessive number of accounts with low balances. This leads to an economic burden on the banks.
- Money Laundering: There are worries that black money operators use poor people’s Jan Dhan accounts for money laundering.
Following demonetization, Jan Dhan accounts were utilized for money laundering. - Reducing Overdraft Facility: The banks in question have the authority to decide whether to provide an OD facility. The goal is defeated when many banks refuse to expand the OD capacity.
- Abuse of Authority: Occasionally, business correspondents (BCs) abuse their power and bring misery to those living in poverty.
BCs may impose additional fees for services—like opening bank accounts, processing transactions, or granting loans—that are meant to be provided without charge or at a minimal cost. - Bad Loans: Since the scheme does not specify how the banks might recover debts, there is a chance that the overdraft facility will turn out to be bad loans for the banks.
People who have received numerous debt exemptions in the past could come to view the loans as gifts. - Financial and technological illiteracy: People living in rural areas lack the awareness, knowledge, and abilities necessary to make wise decisions around borrowing, saving, investing, and spending.
According to a poll by the massive financial services company Visa, 65% of Indians are not financially literate.
Way Forward
- Centralized Verification System: Utilize digital identity and biometric verification to establish a centralized system that stops account duplication.
Create incentives, like better perks or lower costs, to encourage people to keep just one account instead of many.
The National Strategy for Financial Inclusion (NSFI) for 2025–2030 should prioritize PMJDY to increase the targeted population’s awareness of and penetration of social security schemes.
- Insurance for All: India must shift its emphasis beyond just accounting and balances.
An endeavor is required to guarantee PMJDY account holders’ coverage under Micro Insurance programs.
It is necessary to increase PMJDY account users’ access to microcredit and microinvestments like flexi-recurring deposits. - Greater Penetration of OD Accounts: For PMJDY to catalyze a positive feedback loop of development and support for Viksit Bharat, there needs to be a greater penetration of OD accounts.
- New Focus Areas: According to the Center, PMJDY has addressed most adult populations. Our current focus is on covering all adults and will continue to include those who are becoming adults.
Prelims: UPSC
1. The Priority Sector Lending by banks in India constitutes the lending to (2013) :
(a) agriculture
(b) micro and small enterprises
(c) weaker sections
(d) All of the above
Ans: (d)
2. Pradhan Mantri Jan-Dhan Yojana’(PMJDY) has been launched for (2015)
(a) providing housing loans to the poor people at cheaper interest rates
(b) promoting women’s Self-Help Groups in all backward areas
(c) promoting financial inclusion in the country
(d) providing financial help to the marginalised communities
Ans: (c)
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