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A STUDY ON FINANCIAL INCLUSION THROUGH PMJDY Rashmi Joshi Assistant Professor, Department of Commerce, DM College, Moga, Punjab, India Declaration of Author: I hereby declare that the content of this research paper has been truly made by me including the title of the research paper/research article, and no serial sequence of any sentence has been copied through internet or any other source except references or some unavoidable essential or technical terms. In case of finding any patent or copy right content of any source or other author in my paper/article, I shall always be responsible for further clarification or any legal issues. For sole right content of different author or different source, which was unintentionally or intentionally used in this research paper shall immediately be removed from this journal and I shall be accountable for any further legal issues, and there will be no responsibility of Journal in any matter. If anyone has some issue related to the content of this research paper s copied or plagiarism content he/she may contact on my above mentioned email ID. ABSTRACT Financial inclusion is the delivery of financial services at affordable costs to sections of lowincome segments of society, and in contrast to financial exclusion where those services are not available or affordable. An estimated 2.5 billion working-age adults globally have no access to the types of formal financial services delivered by regulated financial institutions. Financial inclusion is an innovative concept which enables the alternative techniques to promote the banking habits and acts as enabler in reducing the poverty and the launch of Pradhan Mantri Jan DhanYojana (PMJDY) by Government of India is in that direction. The scheme is not only limited to opening of a bank account but has other benefits with it viz. zero balance bank account with RuPay debit card, in addition to accidental insurance cover of Rs 1 lakh, those who open accounts by January 26, 2015 over and above the Rs 1 lakh accident, they will be given life insurance cover of Rs 30,000, etc. This paper is an attempt to discuss the overview of financial inclusion using PMJDY in India, benefits, key elements and effective implementation of the scheme. Key Words: Financial Inclusion, Pradhan Mantri Jan DhanYojana (PMJDY), Economic growth. INTRODUCTION: Financial Inclusion is considered to be the core objective of many developing nations since from last decade as many research findings correlate the direct link between the financial exclusion and the poverty prevailing in developing nations. According to World Bank report Financial inclusion, or broad access to financial services, is 2
defined as an absence of price or non-price barriers in the use of financial services. The term Financial Inclusion needs to be interpreted in a relative dimension. Depending on the stage of development, the degree of Financial Inclusion differs among countries. It s been surprising fact that India ranks second in the world in terms of financially excluded households after china.for the inclusive growth process of economy the central bank has also provided high importance to the financial inclusion. Despite the fact that money related consideration, internationnaly has been seen in a substantially more extensive point of view, the focal point of the budgetary incorporation in India,at show is kept to ensure abare least access to a reserve funds bank a ccount without include ons,to all. Simply having a present record/bank account can't be viewed as anaccurate marker off in ancial incorporation. Aside from having a ledger monetary Inclusion endeavors ought to provideataminimum, acces stoarange of budgetary administrations including investment funds, long and here and now credit, protection, benefits, contracts, cash exchanges, and so on, atreasonable cost. In order to achieve the same government of India have taken an initiative by introducing Pradhan Mantri Jan-DhanYojana (PMJDY). PMJDY is a National Mission for Financial Inclusion which is run by Department of Financial Services, Ministry of Finance, to ensure access to financial services, namely Banking Savings & Deposit Accounts, Remittance, Credit, Insurance, and Pension in an affordable manner. This inclusion campaign was launched by the Prime Minister of India Mr. Narendra Modi, on 28 August 2014. He had announced this scheme on his first Independence Day speech on 15 August 2014. The present study focuses on how PMJDY contributes towards financial inclusion in India. Objectives 1. To study and understand PMJDY scheme introduced by GOI. 2. To explore the need and significance of financial inclusion for economic and social development in India. 3
3. To analyze how PMJDY contributes for the growth in financial Inclusion in India. Methodology The study is purely a descriptive study. It is confined to the conceptual framework of financial inclusion through Pradhan Mantri Jan-DhanYojana (PMJDY) in India. II. PRADHAN MANTRI JAN DHAN YOJANA (PMJDY) Pradhan Mantri Jan DhanYojana (PMJDY) was announced on 15 th August 2015by our Honorable Prime Minister as a National Mission for Financial Inclusion which is taken up to ensure access to financial services, namely Banking Savings & Deposit Accounts, Remittance, Credit, Insurance, and Pension in an affordable manner by Department of Financial Services, Ministry of Finance. This inclusion campaign was formally launched by the Prime Minister of India Mr. Narendra Modi, on 28 August 2014. On the inaugural day itself 1.5 Crore bank accounts were opened under this scheme. The Achievements made under PMJDY were recognized by Guinness World Records Recognizes, the Indian banks could achieve around 18,096,130 accounts in the first week as apart of financial inclusion. By 05 August 2015, 17.45 crore accounts were opened; with around 22032.68 crore were deposited under the scheme. The PMJDY is based on Six Key elements 1) Universal access to banking facility: The First aim is to reduce and remove the exclusions in financial sector. District will be divided into sub service area catering to 1000 to 1500 household for access to basic banking facility by 14 august 2015. 2) Providing Basic Banking Accounts with overdraft facility and RuPay Debit card to all households: The effort would be to first cover all uncovered households with banking facilities by August, 2015, by opening basic bank accounts. Account holder would be provided a RuPay Debit Card. Facility of an overdraft to every basic banking account holder would be considered after satisfactory operation / credit history of six months. 3) Financial Literacy Program: Financial literacy would be an 4
integral part of the Mission in order to let the beneficiaries make best use of the financial services being made available to them. 4) Creation of Credit Guarantee Fund: Creation of a Credit Guarantee Fund would be to cover the defaults in overdraft accounts. 5) Micro Insurance: To provide microinsurance to all willing and eligible persons by 14 August, 2018, and then on an ongoing basis. 6) Unorganized sector Pension schemes like Swavalamban: By 14 August, 2018 and then on an ongoing basis. For the successful implementation of PMJDY, unemployed youth & entities like retired bank employee, retired teachers, retired Government / Military personnel, etc., kirana shops, PDS, PCOs, CSCs, NGOs/MFIs and section 25 companies, Self Help Groups (SHG), Civil Society Organisations, agents of small saving schemes of Government of India, individual petrol pump owner, authorized functionaries of SHG, non-deposit taking NBFCs, Post Offices/Postman/GraminDakSewak, cooperative societies or other eligible individuals/entities were allowed by RBI from time to time and were called as Bank Mitra (Business Correspondent)8 The Bank Mitra (Business Correspondent) outlets (in both rural and urban areas) would be fully equipped with the required infrastructure including the computers and other peripherals like Micro ATM, Bio-metric scanners, Printer, Web cam and internet connectivity. III. FINANCIAL INCLUSION - A TOOL FOR ECONOMIC GROWTH "Financial inclusion is delivery of banking services at an affordable cost ('no frills' accounts,) to the vast sections of disadvantaged and low income group. Unrestrained access to public goods and services is the sine qua non of an open and efficient society. As banking services are in the nature of public good, it is essential that availability of banking and payment services to the entire population without discrimination is the prime objective of the public policy." This concept broadens the resource base of the financial system by developing a culture of savings among large segment of rural population and plays its 5
own role in the process of economic development. Further, by bringing low income groups within the perimeter of formal banking sector; financial inclusion protects their financial wealth and other resources in exigent circumstances. The importance of Financial Inclusion can be revealed from the following: 1) It is a necessary condition for sustaining equitable growth. 2) It protects the poor people from the clutches of usurious moneylenders. 3) It will make possible for the governments to make payments under the social security schemes like National Rural Employment Guarantee Program (NREGA) through bank accounts of the beneficiaries, by Electronic transfers. This will minimize transaction costs including leakages. 4) It provides an avenue for bringing the savings of the poor into the formal financial intermediation system and channel them into investment. 5) The large number of low cost deposits will offer banks an opportunity to reduce their dependence on bulk deposits and help them to better manage both liquidity risks and asset liability mismatches. IV. FINANCIAL INCLUSION IN INDIA The concept of financial inclusion in 2005 was introduced by Mr. K C Chakraborthy, Chairman, Indian Bank, in India. By relaxing the KYC norms many households were encouraged to get access to banking services. For the first time in Mangalam village all the households were provided with banking facilities.. As a part of financial inclusion initiative many a schemes like expansion of bank branches, POSBs, Sector wise lending, Establishment of RRB s, SHG s etc were introduced by RBI. In spite of many efforts and initiatives, RBI did not reach the expected level of inclusions in India. Thus in order to obtain greater financial inclusion support was gathered by from various SHG s and NGO s and made them as intermediaries through use of Business Facilitator and Business Correspondent Model. Pradhan Mantri Jan DhanYojana (PMJDY) Financial inclusion is one such innovative 6
concept which empowers the alternative techniques to promote the banking habits and acts as enabler in reducing the poverty. By the launch of Pradhan Mantri Jan DhanYojana (PMJDY) by Government of India is in that direction to achieve financial inclusion to an acceptable degree. Apart from bank account, this scheme provides many other related benefits like zero balance bank account with RuPay debit card, with an accidental insurance cover of Rs 1 lakh. People who open accounts on or before January 26, 2015 over and above the Rs 1 lakh accident insurance along with life insurance cover of Rs 30,000, was also given.all the MGNREGA payments are to be done in to the accounts of the MGNREGA workers in rural areas held either in Banks/ Post Office (unless exempted) according to GOI. The core objective of the PMJDY scheme is to ensure that all the households should have a bank account. Out of 9.98 Crore accounts of the MGNREGA worker 3.66 Crore accounts are in Post Offices and 0.75 Crore in Cooperatives. Thus all banks were directed to work in this direction for a greater inclusion. Account can be opened in any bank branch or Business Correspondent outlet. PMJDY accounts are being opened with Zero balance. There have been a many objectives related to the need for financial Inclusion such as: The Economic Objectives of this is for the equitable growth in all the sections of the society to reduce disparities in terms of income and savings the financial inclusion can serve as a boom for the underdeveloped and developing nations like India. Mobilizations of Savings is the basic objective of PMJDY because if the weaker sections are provided with the facility of banking services the savings can be mobilized which is normally piled up at their households can be effectively utilized for the capital formation and growth of the economy. In order to have larger Market for the financial system, there is an urgent need for the larger market for the financial system which opens up the avenue for the new players in the financial sector and can lead to growth of banking sector also. The core objective of the financial inclusion scheme is to serve the requirements and need of the large 7
section of society, poverty eradication as they bridge up the gap between the weaker section of society and the sources of livelihood and the means of income which can be generated for them if they get loans and advances. With this kind of financial inclusion the weaker section of society got some money in the form of loans then they can start up their own business or they can support their education through which they can sustain their livelihood. There are certain political objectives which can be achieved through the wider inclusion of lower income group in the society and an effective direction can be facilitating to the programs which organized by the Government. Benefits of PMJDY Scheme 1) Interest on deposit. 2) Accidental insurance cover of Rs.1.00 lac 3) No minimum balance required. 4) Life insurance cover of Rs.30,000/- 5) Easy Transfer of money across India 6) Beneficiaries of Government Schemes will get Direct Benefit Transfer in these accounts. 7) After satisfactory operation of the account for 6 months, an overdraft facility will be permitted 8) Access to Pension, insurance products. 9) Accidental Insurance Cover, RuPay Debit Card must be used at least once in 45 days. 10) Overdraft facility upto Rs.5000/- is available in only one account per household, preferably lady of the household. V. STRATEGY FOR EFFECTIVE IMPLEMENTATIONS First basic pillar of PMJDY is expansion of banking network of country to reach out to the financially excluded segment. All the villages across the country are to be mapped according to service area of each bank to have one fixed point called Sub Ser-vice Area. Individuals like unemployed youth & entities like retired bank employee, retired teachers, retired Government / Military 8
personnel, etc., kirana shops, PDS, PCOs, CSCs, NGOs/MFIs, Self Help Groups (SHG), Civil Society Organisations, agents of small saving schemes of Government of India, individual petrol pump owner, authorized functionaries of SHG, non deposit taking NBFCs, Post Offices/Postman/Gramin Dak Sewak, coopera-tive societies or other eligible individuals/entities allowed by RBI from time to time may be engaged as Bank Mitra. The Bank Mitra outlets would be fully equipped with the required infrastructure including the computers and other peripherals like Micro ATM, Bio-metric scanners, Printer, Web cam and internet connectivity. Opening of Basic Saving Bank Account of every adult citizen. The second pillar of this plan envisages providing basic bank accounts (Basic Saving Bank Deposit Account - BSBDA with zero balance) to all adult citizens starting with coverage of all households. The third pillar of this plan is the creation of a Credit Guarantee Fund. It is proposed to be housed in National Credit Guarantee Corporation (NCGC). There is wide scope in further development of the scheme. Chairman of IRDA T.S. Vijayan said, that government should launch scheme Jan BimaYojana in lines of similar programmed launched in banking sector. The scheme can be linked to SwachtaAbhiyan. For construction of toilets in rural area finance can be provide under PM JDY. This can be help to boost previous scheme under financial inclusion such as Micro finance, SHG, for working towards positive development. It could help to build small businesses in rural area and creating job opportunity in banking sector. VI. THREATS OF PMJDY There area many benefits of opening account underpradhan Mantri Jan DhanYojana(PMJDY) from those who have account already. There is no check on the new account holder. Regarding debit card implementation there may be slow roll out, logistics issue and possibility of misuse. In rural area availability of ATM is less and people are not familiar in the usage of ATM. There is no clarity that if theexisting account holders would get one lakh accidental insurance coverage. It is also not cleared that who is going to bear bill of insurance premium and cost to keep account running. Creating new account is not a challenge but increasing transaction per account is a challenge. Existing saving 9
accounts without RuPay card not to get other benefits; this is enjoyed by the account holders under Pradhan Mantri Jan DhanYojana scheme. VII. CONCLUSION Financial inclusion broadens the resource base of the financial system by developing a culture of savings among large segment of rural population and plays significant role in the process of economic development. The Pradhan Mantri Jan Dhan Yojana moves forward with the mantra of Sab Ka Saath Sab Ka Vikas by bringing low income groups within the perimeter of formal banking sector and protects their financial wealth and other resources. This scheme also mitigates the exploitation of vulnerable sections by the money lenders by providing financial services and solutions. It is worth of mentioning that Successful implementation would not only reduce poverty but also puts a check on corruption, the burning issue faced by our country. It can be said that accountable and transparent organizational structure for implementing PMJDY will be essential for achieving the desired societal outcomes. Financial inclusion which was taken off in India in 2005 is gaining a lot of momentum, especially after announcement of PMJDY. India may set in a time frame to address poverty in case poverty is arrested by 2026, India may emerge as a superpower by 2030. REFERENCES: 1) Global Financial Development Report 2014 of the World Bank, econ.worldbank.org 2) Financial Inclusion and Development: Recent Impact Evidence, April 2014. https://www.cgap.org 3) Financial Inclusion in India An Assessment, Speech by Shri P VijayaBhaskar, ED, RBI on Dec 10, 2013, at MFIN and Access-Assist Summit at New Delhi. www.rbi.org.in 4) Chakrabarthy K.C (2009), Financial Inclusion, RBI Initiatives at National seminar on launching a National initiative for financial inclusion, DFS GoI. 5) News Papers Business Line, and The Times of India. 6) www:pmjdy.gov.in 7) www:iba.org.in. 10
8) www.wikipedia.com 11