Jan Dhan Yojana: A decade of financial Inclusion and the road ahead

New Delhi: Launched on this day ten years ago, the Pradhan Mantri Jan Dhan Yojana marks a significant milestone in India's journey towards financial inclusion.

While Prime Minister Narendra Modi on Wednesday hailed those who worked to make the Jan Dhan Yojana a success, Congress leader and former finance minister P Chidambaram said it was C Rangarajan, the then RBI governor, who introduced the 'no frills account' or ' zero balance account'.

Here is a look at the achievements, milestones and critical success of PMJDY:

What has PMJDY achieved so far?

Financial inclusion: PMJDY aimed to provide banking services to every household in India. Over the past ten years, it has opened over 53 crore accounts, significantly increasing the number of banked individuals, particularly in rural areas and among women. Approximately 55.6% of these account holders are women, showcasing a notable push towards gender equality in financial access.

Banking services: The scheme introduced basic banking facilities without minimum balance requirements, free RuPay debit cards with insurance cover, and overdraft facilities. This has not only brought millions into the formal banking sector but also provided them with tools for financial security and growth.

Digital transactions: PMJDY has been instrumental in promoting digital financial transactions. With the issuance of over 36 crore RuPay debit cards and the proliferation of PoS/mPoS machines, there's been a substantial increase in digital transactions, fostering a cashless economy.

Integration with government schemes: The scheme's integration with other government initiatives like Direct Benefit Transfer (DBT) has ensured that subsidies and benefits reach the intended beneficiaries directly, reducing leakages and enhancing efficiency.

Economic impact: By connecting the unbanked to formal financial systems, PMJDY has potentially reduced reliance on informal credit sources, thereby decreasing the cycle of debt among the poor. The scheme has also encouraged savings habits, with deposits in these accounts crossing Rs. 2,31,236 crore as of August 2024.

Controlling corruption: The scheme successfully weeded out corruption with beneficiaries of various government schemes for the poor receiving funds directly in their accounts.

Important milestones:

Record-breaking start: PMJDY entered the Guinness World Record for opening the most bank accounts in one week in 2014, setting the tone for its ambitious scale.

Universal access: Achieving near-saturation in terms of household coverage, with states like Kerala and Goa becoming the first to have at least one bank account per household.

Financial literacy: Beyond just opening accounts, PMJDY has been pivotal in increasing financial literacy through various campaigns and initiatives, aiming to educate the populace on managing finances better.

Concerns around PMJDY:

Dormant accounts: Critics argue that while the number of accounts is impressive, a significant portion remains dormant or with minimal activity, questioning the real impact on financial inclusion.

Quality of inclusion: There's a debate over whether mere account opening constitutes financial inclusion or if it should also measure the frequency of usage, savings, and credit utilisation.

Overdraft facility: While an overdraft facility is offered, its actual utilization remains low due to various reasons including lack of awareness or stringent eligibility criteria.

Digital divide: Despite pushing for digital transactions, the digital divide, especially in rural areas with poor internet connectivity, poses a challenge to fully leveraging digital banking services.