Mumbai: More than seven out of every 10 bank accounts opened for the unbanked, mainly for direct transfer of benefits, are seeing transactions, data showed.

These accounts were opened under the government’s financial inclusion plan called Pradhan Mantri Jan Dhan Yojana (PMJDY) and launched by Prime Minister Narendra Modi on 15 August 2014.

Most of the account activity is due to higher government subsidies flowing in, said bankers who continue to conduct their monthly financial literacy and training programmes in rural areas.

While cooking gas subsidies, pensions, scholarships and wages for the rural jobs scheme are currently routed through these bank accounts, new customers are also making small deposits, besides availing loans and insurance facilities.

The share of zero-balance accounts—which indicates lack of activity—has fallen. According to data on the PMJDY website, as on 31 March 2015, 58% of the 147.1 million Jan Dhan accounts were zero-balance accounts.

As on 24 February, only 28.88% were zero-balance accounts, even as the total number of Jan Dhan accounts increased to 210 million.

Total deposits in these accounts now stand at 33,704.89 crore, more than twice the amount ( 15,670 crore) at the beginning of the financial year. This means the average balance in each account that is not classified as zero-balance is about 2,214.56.

The total number of accounts linked to RuPay debit cards—a card payment settlement system that competes with Visa and MasterCard—is 174.6 million.

Routing subsidies and welfare payments through the Jan Dhan scheme has helped plug leakages in subsidy transfer. According to the Economic Survey for 2015-16 released on Friday, leakages in LPG subsidy transfers fell 24% and the exclusion of beneficiaries had been greatly reduced, thanks to the infrastructure created by Jan Dhan accounts, Aadhaar and mobile networks, or the JAM trinity.

These new account holders, however, are not just receiving benefits from the government under the Jan Dhan scheme; they have also started using the accounts to make deposits and avail credit.

“Of the 70 lakh accounts that we have opened since the beginning of the Jan Dhan scheme, we see transaction activities in at least 10 lakh accounts every week. We look at this as a success," said R.C. Lodha, executive director, Central Bank of India.

Lodha said his bank has been conducting monthly financial literacy and outreach programmes in some of the remotest villages.

Similarly, Bank of Baroda has been conducting monthly skill development programmes for rural women in the villages it is active in. The bank is also using mobile seeding, Aadhaar seeding, small credit and micro insurance activities to ensure the accounts are in active use.

“About 83% of the accounts that we have opened since the beginning of the scheme are actively transacting right now. By the end of this financial year, that number should reach 90% of the accounts opened," said G.B. Bhuyan, general manager, Bank of Baroda.

Over the past year alone, additional balances worth 2,300 crore were recorded on the Jan Dhan accounts, Bhuyan added.

Banks have also been engaging business correspondents (BCs) who go to much smaller centres where it doesn’t make economic sense for banks to open a branch. These BCs are being trained by the Indian Institute of Banking & Finance (IIBF) and by the banks themselves to ensure better productivity, the two bankers said.

“We are now able to provide bank account numbers instantly through the BC channel and are urging the customers to deposit some amount right away. This ensures that the zero-balance accounts are fewer in number and these customers are eligible to use the overdraft facility to get credit," Bhuyan said.

To further improve financial inclusion, the Economic Survey 2015-16 calls for greater focus to improve the beneficiary database, build better incentives for supply chain interest groups to support direct benefit transfers, develop the BC infrastructure and mobile money space.

“Regulations governing the remuneration of BCs may need to be reviewed to ensure that commission rates are sufficient to encourage BCs to remain active," the survey report said.

Experts believe that the next phase for the Jan Dhan scheme is to bring in more government benefits into the fold and improve the level of services provided to these customers.

“The Jan Dhan Yojana has, in effect, put the basic plumbing of financial inclusion in place. With the plumbing done, water (cash) will flow. As more of the government schemes get monetized, we will see the volume of the flows increase," said Alok Prasad, an expert in microfinance and the former chief of the Microfinance Institutions Network.

As the reach of formal financial system grows, and people become comfortable with using banking facilities, more transactions will take place, he said.

“Over the next 12 months, it won’t be surprising if the aggregate deposits in these accounts double," he added.

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