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PRADHAN MANTRI JAN-DHAN YOJANA (PMJDY)

Financial inclusion is delivery of financial services at an affordable cost to the vast sections of the disadvantaged
and low-income groups, providing them with timely and adequate access to the financial products, services like
Bank Accounts, Savings Products, Remittances & Payment services, Insurance, advisory services, Entrepreneurial
and Micro credit, Micro finance etc.
National Sample Survey Organisation (NSSO) data reveal that 45.9 million farmer households in the country
(51.4%), out of a total of 89.3 million households do not access credit, either from institutional or non-
institutional sources. Further, despite the vast network of bank branches, only 27% of total farm households
are indebted to formal sources (of which 1/3rd also borrow from informal sources). Thus to improve the

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financial inclusion in India government has launched Pradhan Mantri Jan-Dhan Yojana.
It is National Mission for Financial Inclusion to ensure access to financial services, namely, Banking/ Savings
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& Deposit Accounts, Remittance, Credit, Insurance, Pension in an affordable manner.
Account can be opened in any bank branch or Business Correspondent (Bank Mitr) 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.
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The mission mode objective of the PMJDY consists of 6 pillars. During the 1st year of implementation under
Phase I (15th August, 2014-14th August,2015), 3 Pillars namely:
(1) Universal Access to Banking Facilities
(2) Financial Literacy Programme
(3) Providing Basic Banking Accounts with overdraft facility of Rs.5000 after 6 months and RuPay Debit
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card with inbuilt accident insurance cover of Rs. 1 lakh and RuPay Kisan card, will be implemented.
Phase II, beginning from 15th August 2015 upto 15th August, 2018 will address:
(1) Creation of Credit Guarantee Fund for coverage of defaults in overdraft Accounts
(2) Micro Insurance
(3) Unorganized Sector Pension schemes like Swalamban.
In addition, in this phase coverage of households in hilly, tribal and difficult areas would be carried out.
Moreover, this phase would focus on coverage of remaining adults in the households and students.
The implementation strategy of the plan is to utilize the existing banking infrastructure as well as expand the
same to cover all households. While the existing banking network would be fully geared up to open bank
accounts of the uncovered households in both rural and urban areas, the banking sector would also be expanding
itself to set up an additional 50,000 Business Correspondents (BCs), more than 7000 branches and more than
20000 new ATMs in the first phase.
In the past experience large number of accounts opened remained dormant, resulting in costs incurred for
banks and no benefits to the beneficiaries. The plan, therefore, proposes to channel all Government benefits
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(from Centre/State/Local body) to the beneficiaries to such accounts and pushing the Direct Benefits Transfer
(DBT) scheme of the Union Government including restarting the DBT in LPG scheme. MGNREGS sponsored
by Ministry of Rural Development (MoRD, Government of India) is also likely to be included in Direct
Benefit Transfer scheme.

Impact of Jan Dhan Yojana

For Common Man
a) Anyone who does not have an account will get an account in bank.
b) Common man will get direct benefit of government subsidies.
c) Common man will also have a financial and credit history on government records.
d) It will be easy to get loan directly from financial institutions instead of other modes that charge heavy
interest rate.
For Business

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a) More and more people will be doing shopping via debit cards reducing time, manpower and risk involved
in managing cash transactions.
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b) More relevant data will be available to perform various analyses to create marketing plans.
For Government
a) It will be a great milestone achieved after linking with Aadhaar card to make direct financial transactions,
subsidies transfer and lot more.
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b) It will be easy to monitor transactions and collect financial data as more people will be using recorded
mode of payments.
For Banking Institutions
a) Banks will get new customers that directly means more money inflow.
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b) These customers may result in potential clients for other banking services like loans.

Current Status of Jan Dhan Yojana (As Of APRIL 2016)

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Challenges before Jan Dhan Yojana
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Jan Dhan Yojana relies heavily on the business correspondent (BC) model for expanding the banking network
in both the rural and urban areas. One of the primary reasons behind the unsatisfactory performance of the
BC model is the poor remuneration (Rs 2000-3000 per month) paid to business correspondents.

For such a meager amount, it is unfair to expect a business correspondent (BC) to visit villages or slums at
regular intervals, open new bank accounts for the poor people, process financial transactions, educate customers
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about banking services and answer all queries of the customers. Under the JDY, the business correspondent
(BC) will get a minimum compensation of Rs.5000 per month.
There are several other important factors which act as a barrier in the delivery of banking services through
the BC model. Some of these factors include
Inordinate delay in issuing smart cards to customers (3-6 months);
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Limited utility of smart cards as services such as remittance are not loaded;
Inadequate cash handling limit given to business correspondent (BC);
Devices not working properly due to technical problems or poor network connectivity;
Lack of trust in bcs;
Lack of customer-centric banking products and services;
Poor governance and inadequate supervision of bcs;
Absence of a comprehensive strategy for financial education.
The expanded financial architecture will need personnel, which is lacking, and could be important supply side
deficit. Banks have been advised under the PMJDY to open 200 Accounts a day in each of their existing rural
branches, but they are wary, as the existing infrastructure in those branches cannot handle the extra load.
Therefore, banking reach should be increased gradually and along with the capacity of banking infrastructure,
so that the customer base at any time can be serviced well and the system is not pressurized at any time.
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Other ambiguities and problems with the scheme and suggestions to tackle them are:
People may open multiple accounts using different ID proofs on the lure of getting insurance covers.
Monitoring has to be done in this regard. All banks must have a centralised information sharing system
so that this loophole can be countered.
People may be taking benefit of the same scheme under different accounts. This is possible especially
when the customer uses different mode of self-verification. If verification is done using means other than
the Aadhaar Card, then, a follow up of the customer must be done in order to ensure that there are no
dual benefits enjoyed by him/her. This can be done by mandating the customer to produce an Aadhaar
Card within a week of opening of his or her account.
If a bank is being set up, it must be set up at a place with road connectivity and must be situated at the
heart of the villages and towns, especially at areas where trade is generated. It is necessary that the bank
also fulfills its other purposes such that it is viable as well as profitable to operate in a given area.
Even if, it is a zero balance account, credibility of the account holder has to be checked. The Overdraft

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facility to the account holder may turn into a sub-standard or Non- Performing Asset for the banker. Thus,
credit should be made available by the banker only after due diligence and not by just going by the scheme.

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The financial literacy centre is to be held by the banker so as to keep customer aware of the services
available and when and how to use them and to keep them updated of the new financial products available
to her/him.
Financial inclusion cannot be achieved only by meeting the target numbers. The Reserve Bank of Indias
Governor, Raghuram Rajan had cautioned banks on the risks involved in just hunting for number with regard
to Jan-Dhan Scheme, asking them not to compromise on core objective of the programme. "When we roll out
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the scheme, we have to make sure it does not go off the track. The target is universality, not just speed and
numbers." The scheme can be a "waste" if it leads to duplication of accounts, if no transaction happens on
the new accounts and if the new users get bad experiences.
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