Pradhan Mantri Jan Dhan Yojana: From benefits to impact; all you need to know

In 2014, the Indian government launched the Pradhan Mantri Jan Dhan Yojana (PMJDY) to provide financial services to all citizens, regardless of their socio-economic status. The scheme has made significant progress towards increasing financial literacy and reducing poverty, but it still faces challenges. 

Pradhan Mantri Jan Dhan Yojana is a National Mission on Financial Inclusion which has an integrated approach to bring about comprehensive financial inclusion and provide banking services to all households in the country. 

The scheme ensures access to a range of financial services like availability of basic savings bank account, access to need based credit, remittances facility, insurance and pension.

Objectives of PMJDY

Universal access: The main objective of PMJDY is to ensure that every Indian has access to basic financial services such as a savings account, debit card and insurance. This would help to curb financial exclusion and promote inclusive growth.

Financial stability: The scheme aims to promote financial literacy by offering information about the importance of saving, insurance and responsible borrowing. PMJDY is designed to create awareness among people about the benefits of financial planning and to inculcate a habit of savings among households.

Direct benefit transfer: PMJDY is also geared towards providing banking facilities to disadvantaged and marginalised sections of society, who receive benefits from various government schemes. Through direct benefits transfer, recipients will be able to receive financial assistance from the government without intermediaries, reducing corruption and increasing transparency.

Benefits of PMJDY

No minimum balance requirements:  PMJDY accounts are zero-balance accounts and do not require any minimum balance to be maintained. This makes it easier for low-income groups and rural households to access banking services.

Debit card and overcard facility: PMJDY account holders are provided with a RuPay debit card for easy transactions. They can also avail of an overdraft facility of up to ₹10,000, subject to eligibility criteria and account performance.

Accidental insurance cover: PMJDY account holders are eligible for life and accidental insurance cover of ₹30,000 and ₹2 lacs respectively, provided they access their account at least once in 45 days.

Progress and impact of PMJDY

As of September 2021, over 43 crore accounts have been opened under the scheme, with deposits totalling around ₹1.55 lakh crore. PMJDY has brought millions of people into the formal banking system, providing them access to credit, insurance and government benefits.

The scheme has played a significant role in improving financial inclusion in India. It has created millions of new bank accounts, particularly in rural areas, and has enabled account holders to make transactions digitally. In addition, PMJDY has enabled the government to transfer subsidies and benefits directly to the bank accounts of beneficiaries. This has reduced leakages and delays and has contributed to the overall efficiency of government programs.

Limitations of PMJDY

Technology: The lack of appropriate infrastructure and slow internet speeds in rural areas has hindered the uptake of digital modes of banking and has made it difficult for customers to access their accounts.

Financial Literacy: Despite efforts to promote financial literacy, many people are still unaware of the benefits of formal banking. This has resulted in low usage of PMJDY accounts.

Product Design: The product design of PMJDY does not cater to the specific needs of certain groups such as women, transgender persons, and the elderly.

Initiatives of  PMJDY

Mass awareness campaigns: The Government of India has been running mass awareness campaigns to educate people about the benefits of PMJDY and to encourage them to participate in the scheme. The campaigns have been successful in creating awareness and driving adoption.

Digital India initiative:  The Digital India initiative is an ambitious program aimed at transforming India into a digitally empowered society and knowledge economy. Through this initiative, the government is focusing on increasing internet penetration and promoting digital literacy across the country, which should help improve the uptake of PMJDY accounts in rural areas.

Financial inclusion of women: The government has recognised the need for women's financial inclusion and has launched initiatives such as the Mahila E-Haat and Mudra Yojana to provide women with access to credit and enable them to become financially independent.

In conclusion, PMJDY has undoubtedly been a game-changer for financial inclusion in India. It has enabled millions of households to access formal financial services and has brought them into the mainstream economy. 

Nevertheless, there is still a long way to go before we can achieve universal financial inclusion in the country. By addressing the key challenges and continuing to innovate, PMJDY has the potential to transform the financial landscape of India and drive further economic growth and development.

Rohit Gyanchandani is Managing Director at Nandi Nivesh Private Limited