Home >Industry >Banking >State-run banks prop up Jan Dhan as private lenders falter

MUMBAI : India’s state-run banks helped drive the tally of Jan Dhan bank accounts in the year ended 31 March, offsetting a weaker performance by private lenders in the government’s flagship financial inclusion programme, data reviewed by Mint showed.

Launched in August 2014, the Pradhan Mantri Jan-Dhan Yojana (PMJDY) aims to provide universal access to banking services with at least one basic bank account for every household.

Private banks counted 55,349 fewer Jan Dhan bank accounts as of end-March, compared to the start of FY21. State-run lenders, meanwhile, continued to power the programme’s reach.

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As of 24 March—the latest available data—the total number of such basic savings accounts stood at 420.8 million for all banks, up from 380.7 million as of 1 April 2020, showed data from the PMJDY website. This is the aggregate of public sector banks, regional rural banks and private banks.

Although on a net basis, Jan Dhan accounts at private banks saw a decline of more than 55,000, some individual private banks recorded steeper contractions.

For instance, ICICI Bank Ltd, one of India’s largest private-sector lenders, ended the fiscal with 278,522 fewer Jan Dhan bank accounts than in April last year. Others such as Karur Vysya Bank, Kotak Mahindra Bank, RBL Bank and Yes Bank also saw a similar trend, albeit of varying proportions.

“ICICI Bank has the largest number of Jan Dhan accounts among private sector banks. Some accounts, which were inoperative for a few years, were closed last year. Since they were dormant accounts, their closure did not cause inconvenience to customers," an ICICI Bank spokesperson said in an emailed statement.

The other banks cited above did not respond to emailed queries.

In stark contrast to their private peers, accounts at state-owned lenders grew 29 million between 1 April 2020 and 24 March 2021.

A senior public sector banker in charge of financial inclusion said that while there used to be several inoperative Jan Dhan accounts earlier, the situation has changed post-covid.

“With the government crediting accounts with funds under various covid-19 schemes, the trend has reversed. While some accounts could have been closed because of inactivity, that is not the sole reason," the banker said on condition of anonymity.

As of 15 January 2020, 18.7% of Jan Dhan accounts were inoperative, data presented in the Parliament showed. A bank account turns inoperative if there are no transactions for two years.

Bankers and sector experts said some banks may have closed some Jan Dhan accounts after finding duplication in some of them. According to guidelines, a customer cannot have multiple basic accounts in different banks.

Others said that accounts could also have been migrated to another category and are, therefore, no longer classified under Jan Dhan accounts.

“While a detailed analysis would be required to pinpoint the real reasons for such contraction in case of private sector banks, however, one of the plausible reasons could be upgradation of such accounts to other categories of savings accounts as per the request of the account holder," said Girish Rawat, a partner at law firm L&L Partners.

Rawat said the less-than-desirable contribution of private-sector banks under PMJDY could be attributable to a lack of their outreach in rural areas. However, as data suggests, the position in urban areas is no different--it could be because these accounts are not commercially lucrative, given their nature, he said.

The government has been keen on bringing more Indians under the ambit of formal banking channels and finally giving them access to credit.

Junior finance minister Anurag Thakur told the Parliament on 8 February that PMJDY has been successful in increasing banking penetration and promoting financial inclusion.

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