ASSESSING THE ROLE EFFICACY OF PRADHAN MANTRI JAN DHAN

YOJANA (PMJDY) IN FINANCIAL INCLUSION: A CASE OF JAMMU

AND KASHMIR.

1. VIVEK SANSON (Research Scholar, University of Jammu)

viveksanson@hotmail.com, 9419130890.
2. Dr. Amisha Gupta (Assistant Professor, University of Jammu)
amishagupta2531@rediffmail.com, 9419110199
 ABSTRACT:
1) INTRODUCTION:
According to a study conducted by CRISIL, one out of two Indians has access to a savings bank
account and one out of seven has access to bank credit in 2013. Nearly 50 % of bottom line
districts in India had just 3 banks per 1 lakh of population in 2013 (CRISIL Inclusive Index,
2013). Moreover, there is more than 50 percent of population that has only a savings bank
account. Overall, the level of financial penetration in India is 40.1 percent which reflects under-
penetration of formal banking facilities in the country (Report on Banking Sector in India, 2014).
As a result, a large chunk of the Indian population is exploited by money lenders even till today.
Non accessibility to financial services such as credit has led their business to suffer and held the
poor in their poverty. They are also denied the benefits of various financial services provided by
banks like micro finance, insurance, debit cards, credit cards, etc. To resolve this critical
problem, financial inclusion is considered to be the key, which is one of the foundation pillars on
which India’s development rests. Financial inclusion was introduced in India in 1904 under
which rural cooperatives were setup and this process was started in two phases i.e. startup of 14
banks in 1955 and 6 in 1980. In March, 1980 banks were instructed to provide banking facilities
to weaker section of society along with other measures i.e. priority sector lending and issuing of
kissan credit cards.
In rural India, group financing has been in vogue as members come together from similar
occupational backgrounds, common religious, cultural and social traits to form Self Help Groups
(SHGs). NGOs have been serving as the promotional agencies for SHGs as they assist the poor
with group formation and in setting common goals for them. However, regional differences in
performance and internal health of SHGs are a major point of concern. Rangarajan Committee
(2008) recommended increasing the outreach of SHGs, providing them a legal status,
encouraging SHGs to offer wider variety of products and making Federations of SHGs. With the
objective of ensuring greater financial inclusion and increasing the out-reach of the banking
sector, RBI in January 2006 decided to enable the banks to use the services of NGOs/SHGs,
MFIs and other Civil Society Organizations as intermediaries in providing financial and banking
services through use of “Business Facilitator and Business Correspondent Model”.
Census 2011 estimated that out of 24.67 crore households in the country, 14.48 crore (58.7%)
households had access to banking services. Of the 16.78 crore rural households, 9.14 crore
(54.46%) were availing banking services and out of 7.89 crore urban households, 5.34 crore
(67.68%) house-holds were using these services. In the year 2011, banks covered 74,351
villages, having population of more than 2,000 (as per 2011 census).
Having realized the fact that more than 10 crore households do not have accessibility to basic
financial services, the government launched a wide array of schemes for the purpose of bringing
the unbanked population within the ambit of banking and financial services. The Financial
inclusion plan of 2012 i.e. “Swabimaan” focused on opening ‘no-frills’ accounts. However, only
20 percent of the bank accounts opened under this plan were operational. Also, the plan only
targeted villages having population more than 2000. Out of nearly 6 lakh villages only 74000
could be covered under this mission by March 2012. In spite of the initiatives aimed at inclusive
financial growth of the Indian population, the efforts of the government have not yielded the
expected results. Dominance of informal sectors in rural financial markets is one of the key
hindrances in the success of these schemes. Money lenders are believed to exploit the poor by
lending money at extortionate rates. The commercial banks were unable to tap the poor due to
lack of credit histories and documented records. Another drawback was the lack of information
among individuals. They lack the information of opening of bank accounts, accessing credit from
formal sources such as banks, benefits of saving for the future etc. In furtherance to the previous
efforts, the government made another attempt to include the last person in the row by launching
Pradhan Mantri Jan Dhan Yojana on August 28, 2014 as one of the initiative to achieve financial
inclusion. The tag line for the scheme is ‘Mera Khata – Bhagya Vidhata’, essentially meaning
that a person’s destiny would be linked to his/her account. This has been the essence of the
scheme, to provide core-banking services, so that each household must have at least one banking
account. Jan Dhan Yojana is a major step towards inclusive growth. The main objective of this
scheme is to end financial untouchability of the poor masses in the country. The scheme has been
modeled to fulfill the vision of financial inclusion by providing economic benefits to all sections
of the Indian society and help the people who are exploited by money lenders and also provide
basic financial services to them. The Financial Inclusion scheme i.e Pradhan Mantri Jan Dhan
Yojana (PMJDY) targets individuals unbanked in both urban and rural India. The individual
accounts opened under PMJDY are categorized as Basic Savings Bank Deposit Accounts
(BSBDA). Initially, every account holder gets a RuPay Debit Card with a Rs. 1 lakh accident
insurance cover. According to ministry of finance, Govt. of India the total number of individual
 bank accounts as on 1 Sep, 2014 was 21 million (aprox.). With the start of PMJDY, the target
was to open 75 million accounts which were further extended to 100 million accounts till 26
January, 2015 whereas the scheme succeeded to open 115 million accounts till the decided date
and this number has reached 216 million individual bank accounts as on 20 Apr, 2016 (Ministry
of Finance, Govt. of India). Even though this scheme has surpassed the decided target level, but
still the scheme is not yielding the expected results as most of the accounts opened under this
scheme have remained dormant, however there is a scope for this scheme to help achieve the
objective of financial inclusion in India. Keeping this into consideration, the purpose of the
present study is to analyze the effectiveness of PMJDY in fulfilling the objective of financial
inclusion and to suggest policy interventions for achieving expected results of financial
inclusion.

2) OBJECTIVES OF THE STUDY:

The main objective of the study is to analyze the financial inclusion journey with the main focus
on the implementation of Jan Dhan Yogana. The following objectives are formulated to fulfill
this pivotal study objective:

∑ To understand the present status of PRADHAN MANTRI JAN DHAN YOJANA.

∑ To assess the effectiveness of the role of PRADHAN MANTRI JAN DHAN YOJANA in
financial inclusion.

3) SCOPE OF THE STUDY:

The proposed study is exploratory in nature and is an attempt to examine the role of PRADHAN
MANTRI JAN DHAN YOJANA scheme in financial inclusion. The geographical scope of the
study includes the area of Jammu and Kashmir. The respondents are the individual account
holders under PMJDY scheme in Jammu and Kashmir. The study draws references for all the
stakeholders of financial inclusion in Jammu and Kashmir.
4) METHODOLOGY:
The research paper aims to analyze the effectiveness of PMJDY. The study requires extensive
use of primary data and analysis of secondary data. The primary research was conducted in
Jammu and Kashmir. The respondents were the customers who have opened their accounts under
PMJDY in Allahabad bank, Jammu and Kashmir Bank, State bank of India and OBC bank. The
direct interaction with individual account holders gave us an insight into the ground reality of the
financial inclusion plan in India. The secondary sources used for the study were financial
inclusion reports published by RBI, CRISIL Inclusive Index reports, research papers, articles.

5) PRELIMINARY FINDINGS:
The study being exploratory in nature draws certain initial inferences which shall be further
probed upon subsequently. The preliminary findings of the study reveal that there is lack of
clarity among individual account holders regarding the terms and conditions of PMJDY. Since
most of the accounts opened under this scheme have remained dormant this scheme is not
yielding the results as expected. So, creating new individual bank accounts is not a challenge, but
increasing transaction per account is biggest challenge to be accomplished. Also, there is lack of
banking infrastructure is the rural areas because of which this scheme is not able to yield the
desired results. Further, during direct interactions with the individual account holders it is
observed that in some areas people have to pay bribe to banking correspondents for opening the
bank account under PMJDY. Hence there is need to educate people regarding the various aspects
of this scheme so that it is able to provide benefit to those who require it and would also help in
achieving financial inclusion.

6) PRACTICAL IMPLICATIONS:
The survey results will help the policy makers by suggesting policy interventions for achieving
expected results of financial inclusion.

7) KEY WORDS:
Financial Inclusion, PMJDY, Role efficacy, Financial Penetration, Economic Development.
REFERENCES:

“CRISIL Inclusix: An index to measure India’s progress on financial inclusion”, CRISIL (June, 2015).
Available at: http://www.crisil.com/pdf/corporate/CRISIL-Inclusix-Volume-III.pdf. Website Last visited
on 17th June’15.

“Financial Inclusion by Extension of Banking Services - Use of Business Facilitators and

Correspondents”, 2006. RESERVE BANK OF INDIA. Available at:
https://rbidocs.rbi.org.in/rdocs/Notification/PDFs/68417.pdf. Website last visited on 17th June ‘15.

“Report of The Committee on Financial Inclusion”, NABARD 2008. Available at:

https://www.nabard.org/English/report_comfinancial.aspx. Website last visited on 17th June’15.

Government of India (2014), “Pradhan Mantri Jan-Dhan Yojana: A National Mission on Financial
Inclusion”. Available at: http://financialservices.gov.in/banking/PMJDY%20BROCHURE%20Eng.pdf.
Website Last visited: 28th June’15.

Government of India (2014), “Pradhan Mantri Jan-Dhan Yojana: A National Mission on Financial
Inclusion”. Available at: http://financialservices.gov.in/banking/PMJDY%20BROCHURE%20Eng.pdf.
Website Last visited: 24th June’15

Government of India (2014), “Pradhan Mantri Jan-Dhan Yojana: A National Mission on Financial
Inclusion”. Available at: http://financialservices.gov.in/banking/PMJDY%20BROCHURE%20Eng.pdf.
Website Last visited: 24th June’15.

http://apjor.com/downloads/251220145.pdf

http://ijrmbs.com/vol1issue4/sudhinder.pdf

http://tejas.iimb.ac.in/articles/JAN%20DHAN%20YOJNA%20ANALYSIS%20OF%20THE%20ONE-
YEAR%20JOURNEY-Tejas-Oct15.pdf

http://tmgt.lsrj.in/SeminarPdf/57.pdf
http://www.csirs.org.in/downloads/ijsirs/vol-3-issue-3/Pradhan-Mantri-Jan-Dhan-Yojana-PMJDY-
Financial-Inclusion-and-Inclusive-Growth-in-India.pdf

http://www.ermt.net/docs/papers/Volume_4/1_January2015/V4N1-108.pdf

Reserve Bank of India, https://www.rbi.org.in/scripts/chro_1968.aspx. Website Last visited: 24th

June’15

Reserve Bank of India, https://www.rbi.org.in/scripts/chro_1968.aspx. Website Last visited: 24th June’15

Shetty, S.L. (2012). Microfinance in India-Issues, Problems and Prospects: A Critical Review of
Literature. New Delhi: Academic Foundation.