FINANCIAL INCLUSION USING PRADHAN MANTRI JAN-DHAN

YOJANA - A CONCEPTUAL STUDY

1. Mr. Divyesh Kumar,
Research Scholar, Assistant Professor,
Dayananda Sagar Academy of Technology and Management, Udayapura, Kanakapura
Road, Bangalore 560082
email: divyesh.kumar4@gmail.com
Mob: +91 9448888381
2. Dr. H R Venkatesha, Research Guide,
Director, Acharya Bangalore B School, 5th cross,
Syndicate Bank Employees Housing society layout,
Off Magadi Road, Andrahalli Main Road,
Bangalore 560091
email: hrvenkatesha@gmail.com
Mob: +91 9448407444

DECLARATION
This is to certify that the paper titled FINANCIAL INCLUSION USING
PRADHAN MANTRI JAN-DHAN YOJANA - A CONCEPTUAL STUDY is an
original work by us and the same has not been submitted earlier for any
publication / conferences / seminars.
Divyesh Kumar
Dr. H R Venkatesha

ABSTRACT
Financial inclusion or inclusive financing is the delivery of financial services at affordable
costs to sections of disadvantaged and low-income segments of society, in contrast to financial

exclusion where those services are not available or affordable. An estimated 2.5 billion
working-age adults globally have no access to the types of formal financial services delivered
by regulated financial institutions. Financial inclusion is an innovative concept which enables
the alternative techniques to promote the banking habits and acts as enabler in reducing the
poverty and the launch of Pradhan Mantri Jan Dhan Yojana (PMJDY) by Government of
India is in that direction. The scheme is not only limited to opening of a bank account but
has other benefits with it viz. zero balance bank account with RuPay debit card, in addition
to accidental insurance cover of Rs 1 lakh, those who open accounts by January 26, 2015 over
and above the Rs 1 lakh accident, they will be given life insurance cover of Rs 30,000, etc.
This paper is an attempt to discuss the overview of financial inclusion using PMJDY in India
Key Words: Financial Inclusion, Financial Services, Banking habits

Introduction
According to a report, only 48 per cent of Indian adults have bank accounts and nearly half of
them lie latent. According to a nation-wide survey on financial behavior, India has the highest
account dormancy rate The survey conducted by the Financial Inclusion Insights program,
operated by global strategic research consultancy InterMedia and supported by the Bill &
Melinda Gates Foundation, argued that the majority of Indians borrow money from family and
friends and not from financial institutions.

Financial inclusion is delivery of banking services at an affordable cost ('no frills' accounts,) to
the vast sections of disadvantaged and low income group. Unrestrained access to public goods

and services is the sine qua non of an open and efficient society5. As banking services are in the
nature of public good, it is essential that availability of banking and payment services to the
entire population without discrimination is the prime objective of the public policy." Indian
Institute of Banking and Finance
Pradhan Mantri Jan-Dhan Yojana (PMJDY) is National Mission for Financial Inclusion is based
on Sab ka sath sab ka vikas i.e. inclusive growth to ensure access to financial services, namely,
Banking/ Savings & Deposit Accounts, Remittance, Credit, Insurance, Pension in an affordable
manner, launched by Shri. Narendra Modi on 28 August 2014.

Literature Review
1. Research Paper on, Overview of Financial Inclusion in India, by C. Paramasivan and V.
Ganeshkumar, Financial inclusion aimed at providing banking and financial services to
all people in a fair, transparent and equitable manner at affordable cost. This paper is an
attempt to discuss the overview of financial inclusion in India1.
2. Mr. Nanjibhai D. Ranparia in his Research Paper on, Financial Inclusion in Gujarat: A
Study on Bankers Initiatives includes study of different financial inclusion aspects and
evaluates progress and current status of financial inclusion of the state3.
3. Dr. Anupama Sharma and Ms. Sumita Kukreja in, An Analytical Study: Relevance of
Financial Inclusion for Developing Nations, states the role of financial inclusion, in
strengthening the Indias position in relation to other countries economy. The study
gathered data through secondary sources including report of RBI, NABARD, books on
financial inclusion and other articles written by eminent authors2.

Objectives

1. To understand the concept of financial inclusion

2. To get a clear understanding of PMJDY
3. To list out the negative implications of PMJDY

History of Financial Inclusion in India

Mr. K C Chakraborthy, Chairman, Indian Bank introduced the concept of financial inclusion in
2005, in India. All the households in Mangalam village were provided with banking facilities for
the first time. Relaxation of KYC norms encouraged many households to get access to banking
services.
As financial inclusion initiative RBI introduced many a schemes like expansion of bank
branches, POSBs, Sector wise lending, Establishment of RRBs, SHGs etc.
Despite of these initiatives, RBI did not reach the expected level of inclusions. Thus to ensure
greater financial inclusion it took support from various SHGs and NGOs and requested them to
act as intermediaries through use of Business Facilitator and Business Correspondent Model.

Pradhan Mantri Jan Dhan Yojana (PMJDY)

Financial inclusion is an innovative concept which enables the alternative techniques to promote
the banking habits and acts as enabler in reducing the poverty and the launch of Pradhan
Mantri Jan Dhan Yojana (PMJDY) by Government of India is in that direction. The
scheme is not only limited to opening of a bank account but has other benefits with it viz.
zero balance bank account with RuPay debit card, in addition to accidental insurance cover of
Rs 1 lakh, those who open accounts by January 26, 2015 over and above the Rs 1 lakh
accident, they will be given life insurance cover of Rs 30,000, etc.

According to GOI, MGNREGA payments are to be done in to the accounts of the MGNREGA
workers in rural areas held either in Banks/ Post Office (unless exempted) and the objective of
the PMJDY scheme is to ensure that no household is left without a bank account. There are
total 9.98 Crore accounts of the MGNREGA worker in Bank/ Post Offices. Out of this there
are 3.66 Crore accounts in Post Offices and 0.75 Crore in Co-operatives. Thus all banks were
directed to work in this direction for a greater inclusion6.

Account can be opened in any bank branch or Business Correspondent outlet. PMJDY accounts
are being opened with Zero balance. However, if the account-holder wishes to get cheque book,
he/she will have to fulfill minimum balance criteria.

Benefits of PMJDY Scheme

a. Interest on deposit.
b. Accidental insurance cover of Rs.1.00 lac
c. No minimum balance required.
d. Life insurance cover of Rs.30,000/e. Easy Transfer of money across India
f. Beneficiaries of Government Schemes will get Direct Benefit Transfer in these accounts.
g. After satisfactory operation of the account for 6 months, an overdraft facility will be
permitted

h. Access to Pension, insurance products.

i. Accidental Insurance Cover, RuPay Debit Card must be used at least once in 45 days.
j. Overdraft facility upto Rs.5000/- is available in only one account per household,
preferably lady of the household.
The PMJDY is based on Six Key elements
1. Universal access to banking facility: The First aim is to reduce and remove the exclusions in
financial sector. District will be divided into sub service area catering to 1000 to 1500 household
for access to basic banking facility by 14 august 2015.

2. Providing Basic Banking Accounts with overdraft facility and RuPay Debit card to all
households: The effort would be to first cover all uncovered households with banking facilities
by August, 2015, by opening basic bank accounts. Account holder would be provided a RuPay
Debit Card. Facility of an overdraft to every basic banking account holder would be considered
after satisfactory operation / credit history of six months.

3. Financial Literacy Program: Financial literacy would be an integral part of the Mission in
order to let the beneficiaries make best use of the financial services being made available to
them.

4. Creation of Credit Guarantee Fund: Creation of a Credit Guarantee Fund would be to cover
the defaults in overdraft accounts.

5. Micro Insurance: To provide micro- insurance to all willing and eligible persons by 14
August, 2018, and then on an ongoing basis.

6. Unorganized sector Pension schemes like Swavalamban: By 14 August, 2018 and then on
an ongoing basis.

For the successful implementation of PMJDY, unemployed youth & entities like retired bank
employee, retired teachers, retired Government / Military personnel, etc., kirana shops, PDS,
PCOs, CSCs, NGOs/MFIs and section 25 companies, Self Help Groups (SHG), Civil Society
Organisations, agents of small saving schemes of Government of India, individual petrol pump
owner,

authorized

functionaries

of

SHG,

non

deposit

taking

NBFCs,

Post

Offices/Postman/Gramin Dak Sewak, cooperative societies or other eligible individuals/entities

were allowed by RBI from time to time and were called as Bank Mitra

(Business

Correspondent)8

The Bank Mitra (Business Correspondent) outlets (in both rural and urban areas) would be fully
equipped with the required infrastructure including the computers and other peripherals like
Micro ATM, Bio-metric scanners, Printer, Web cam and internet connectivity.

Facts and Figures Implementation of PMJDY7

Chart 1: Bank Accounts opened under PMJDY as on 09.12.2014
180
160
140
120
100
80
60
40
20
0

Bank Accounts Opened

Under PMJDY - TOP 10:
ACCOUNTS
Bank Accounts Opened
Under PMJDY - TOP 10: RUPAY
DEBIT CARDS
Bank Accounts Opened
Under PMJDY - TOP 10: NO
OF ACCOUNTS WITH ZERO
BALANCE

Source: Pradhan Mantri Jan-Dhan Yojana, Department of Finance services, Ministry of Finance.

Chart 2: Bank Accounts Rural/Urban (Top 10 Banks with maximum rural coverage)

180 166.07
160
140
120 98.23
100
80 67.84
47.41 46.53 39.41
47.36
60
40.05
38.03
32.68 27.8 25.9623.64
31.39 29.46 24.74
22.78
40
19.57
19.59 9.39
16.88
16.41 13.54
15.13 9.96 7.95
9.38
9.08
6.05 13.39
20
0

RURAL
URBAN
ACCOUNTS

Source: Pradhan Mantri Jan-Dhan Yojana, Department of Finance services, Ministry of Finance.
Chart 3: Bank Accounts (Top 10 Banks with maximum deposits under PMJDY)

Bankwise Account Opened Detail Report as on 9.12.2014 BALANCE IN ACCOUNTS (IN LACS)

Punjab National Bank Canara Bank

United Bank Of India
7179.35
Punjab & Sind Bank
8322

Bank of Baroda

Oriental Bank of Commerce

Uco Bank

State Bank of Bikaner and State Bank of Patiala

Jaipur

State Bank of Travancore

12332.32 Corporation Bank
42928.74 State Bank of India Union Bank Of India
13467.09
3789.49
3587.6Dena
2084.08
7156.99
13683.45
13752
16035
72829.08
16214
Central 5963.15
bank of India
Bank 1273.73989.87
21927.43
23156
23583.47
58895.7 36787
28275.61
77589.14 Bank of Maharastra State Bank of Hyderabad
29245
Andhra Bank
Vijaya Bank
Indian Overseas Bank State Bank of Mysore

Bank Of India
Syndicate Bank
286.61
260.72
Indian bank
Allahabad Bank
IDBI
Bhartiya Mahila Bank

Source: Pradhan Mantri Jan-Dhan Yojana, Department of Finance services, Ministry of Finance.

Probable Threats of PMJDY

ATM Network in rural India is less hence the people are less aware of using ATMs
No check on the new account chances of existing account holders opening additional

accounts under this scheme is high

Government can easily encourage people to open new accounts but the biggest challenge

is increasing the transactions in those accounts.

No clarity about non recovery of over draft and the associated cost.

Conclusion
One of the greatest steps ever taken to eradicate poverty is financial inclusion through PMJDY.
For the success of any scheme constant review and regular check is very much essential.
Successful implementation would not only reduce poverty but also puts a check on corruption. A
bold first step by NDA Government indeed helped many to come into the main stream of
economy and reduce financial untouchability.

References
1. C. Paramasivan and V. Ganesh kumar (2013) Overview of Financial Inclusion in India
Overview of Financial Inclusion in India, International Journals of Management and
Development Studies, Vol. 2, March, PP45-49

2. Dr. Anupam Sharma and Ms. Sushmita Kukereja (2013) An Analytical study: Relevance
of Financial Inclusion for Developing nations, International Journal of Engineering and
Science, PP15-20.

3. Mr. Nanjibhai D. Ranparia (2013) Financial Inclusion in Gujarat: A Study on

Bankers Initiatives, International Journal Of Scientific Research, Vol.2, February, PP3234

4. Pradhan Mantri Jan Dhan Yojana: 5 things you want to know Zee Biz, Sunday, August
31, 2014, 12:39 retrieved from http://zeenews.india.com/
5. en.wikipedia.org/wiki/Pradhan_Mantri_Jan_Dhan_Yojana
6. http://nrega.nic.in/Netnrega/WriteReaddata/Circulars/Letter_to_State_PMJDY_02092014
.pdf
7. http://www.pmjdy.gov.in/account-statistics-bankwise- table.aspx?yk5LV86RBm
%2bw8UWGuIqJ9Qj0gtLNyEU0ZBb8yLVW%2bE0%3d
8. http://trak.in/tags/business/2014/11/06/pm-jan-dhan-yojana-success/