PMJDY: A gateway to Financial Inclusion

ABSTRACT PMJDY: A gateway to Financial Inclusion Assistant Professor, Shaheed Bhagat Singh College, Delhi University, New Delhi, India. PMJDY initiated on the principle of Sab ka sath, sab ka Vikas clearly implies that the gateway to Economic growth for India is possible only when each and every Indian participates in this process. The Yojana a national mission on financial inclusion aims at covering all households in the country with banking facilities and having a bank account for each household. This paper is an empirical study of the PMJDY with reference to Financial Inclusion, analysis of the state of financial inclusion before and after PMJDY (till August, 2016). And a SWOC analysis of PMJDY Prime Minister Narendra Modis dream project. Key Words: PMJDY, Financial Inclusion, Economic growth INTRODUCTION The Indian banking industry has shown a lot of growth in terms of size, complexity as well as improvements in financial feasibility, competitiveness and productivity, however only 58.7% (Census-2011) household population has access to banking services indicating that still a large section of the population remains unbanked, particularly the underprivileged sections needs to be brought into the bracket of basic banking services. Efforts in the form of Sawabhimaan campaign in 2011, appointment of BC (Banking Correspondent) are being made to eradicate financial exclusion so as to lift the standard of living and provide opportunities to the poor and disadvantaged. Aggressive policies need to be introduced with proper regulatory framework and consumer education so that it percolates the impact of growth to the bottom of the pyramid and unlock its growth potential. PMJDY launched on 28 th August, 2014 on the principle of Sab ka sath, sab ka Vikas clearly implies that the gateway to Economic growth for India is possible only when each and every Indian participates in this process. The Yojana a national mission on financial inclusion aims at reaching all households in the country with banking facilities and ensuring a bank account for each household. According to the Committee of Financial Inclusion, 2008, Financial Inclusion is the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost. It primarily represents access to a bank account backed by deposit insurance, access to affordable credit and the payments system. OBJECTIVES OF THE STUDY: The paper aims at: 1. Understanding PMJDY 2. Understanding Financial Inclusion- state of financial inclusion before and after PMJDY. 3. SWOC Analysis of PMJDY 147

4. Demonetization and PMJDY. RESEARCH METHODOLOGY: The study is primarily based on secondary data. The sources of data are-- Published sources which include government publications and other publications like research articles published in journal and available on websites. LITERATURE REVIEW: For a clear understanding various reports, white papers, dissertations and academic journals were reviewed. A few of them are listed here: Sharma A and Kukreja S (2013) - An Analytical Study: Relevance of Financial Inclusion for Developing Nations, the study is based on secondary sources of data. The study affirms the role of financial inclusion in improving India s position across the globe. Patnaik BCM, Satpathy I & Supkar A (2014) - Their study is based on primary data collected from 281 respondents. The study is an attempt to understand the hopes and expectations of customers of the Odisha Gramin Bank (OGB). The authors attempt to understand the financial reforms initiated by the Government of India and the extent to which the aspirations of the customers are being taken care of. Kunthia R (2014) -The research paper attempts to study the state of Financial Inclusion in India with special reference to the Pradhan Mantri Jan-Dhan Yojna (PMJDY). The paper is a study of PMJDY, its key role, the problems in the process and suggests strategies to attain universal coverage for the disadvantaged population and the large unbanked areas of the country. Bhuvaneshwari P & Pushpalatha P (2013) - The authors are of the view that the Indian banking system needs to focus more on the problems being faced by rural India. The authors believe in the concept of social banking which primarily constitutes access to financial services by the poor and results in human development; it s a system where the rich subsidizes the provision of the financial services for the poor. They feel that social banking can play a pivotal role in financial inclusion in India. Dangi N & Kumar P (2013) - Their research work focuses on the various policy measures initiated by the RBI and the GoI for implementing financial Inclusion, its current status and future prospects. The authors conclude that despite various policy and technological changes implemented in the road for achieving 100 % Financial Inclusion, a large section of the population is still deprived from access to affordable and appropriate financial services. PMJDY- AN OVERVIEW: Zero balance accounts: No minimum balance required. Accident insurance cover of Rs. 1 lakh with RuPay Debit Card given to the account holder. For the accounts opened up to January, 26, 2015 an additional Rs. 30,000 life insurance cover. Easy transfer of money across India. Interest on deposit. 148

The account holders will get direct benefit transferred in their accounts thus making them beneficiaries of all government schemes. After satisfactory operation of the account for 6 months there is a provision of overdraft facility up to Rs. 5,000 but in only one account per household preferably lady of the household. Access to pension, insurance product. RuPay Debit Card must be used at least once in 45 days. RuPay Debit Card can be used to avail of the benefits of insurance under PMJDY. Micro card limit of Rs. 5,000 can also be extended in existing bank accounts on application depending on the satisfactory conduct of the account STATUS OF FINANCIAL INCLUSION BEFORE PMJDY: As per Census, 2011, there were 24.67 crore households in the country, out of which 14.48 crore (58.7%) households had access to banking services. This included 16.78 crore rural households, out of which only 9.14 crore (54.46%) were availing banking services. And out of the 7.89 crore urban households, 5.34 crore (67.68%) households were availing banking services. In the year 2011, under the Swabhimaan campaign Banks accessed 74,351 villages, with population more than 2,000 (as per 2001 census), with banking facilities through Business Correspondents(BC). BCs are representatives of bank and provide with basic banking services i.e. opening of basic Bank accounts, Cash deposits, Cash withdrawals, transfer of funds, balance enquiries, mini statements etc. However the programme had a very limited reach and impact. As on 31.03.2014 banking network of the country comprised of a bank branch network of 1,15, 082 and an ATM network of 1,60,055. Of these, 43,962 branches (38.2%) and 23,334 ATMs (14.58%) were in rural areas. Moreover, there were more than 1.4 lakh Business Correspondents (BCs) of Public Sector Banks and Regional Rural Banks in the rural areas. However actual field level experience suggests that many of these BCs were not actually functional. As on 31.05.2014 Public Sector Banks (PSBs) including RRBs have estimated that, out of the 13.14 crore rural households which were allocated to them for coverage about 7.22 crore households have been covered (5.94 crore uncovered). Approximately 6 Crore households in rural and 1.5 Crore in urban area needs to be covered. COMPARATIVE STATUS OF FINANCIAL INCLUSION before and after PMJDY Table:1 No of Accounts Opened: during 2011-12, 2012-13, 2013-14 Particulars April 2010 April 2011 April 2012 April 2013 PMJDY to March to March to March to March till 2011 2012 2013 2014 09.09.2015 No of Accounts 3.12 3.37 4.36 6.09 18.17 opened (in Crore) Source: RBI Annual Report, 2011-12, 2012-13, 2013-14 & Source: http://pmjdy.gov.in/account-statistics-country.aspx 149

The above table shows that between 1st April 2010 to 31st March 2011 total Accounts opened by bank branches and BCs were 3.12 crores. Between 1st April 2011 to 31st March 2012 total 3.37 crores accounts opened, between 1st April 2012 to 31st March 2013 total 4.36 crores accounts opened, between 1st April 2013 to 31st March 2014 total 6.09 crores accounts opened, but under PMJDY a total 18.17 crores account opened till 09th September 2015 (Phase-I) which was 298% more than 2013-14. ROAD-MAP FOR PMJDY: The PMJDY has been implemented in 2 phases and it consists of 6 pillars. Phase-I introduced on 15 August-2014-14 August-2015, includes three Pillars namely (1) Universal access to banking facilities, (2) Financial Literacy Programme and (3) Providing Account holders with an overdraft facility of Rs.5000 after six months and RuPay Debit card with inbuilt accident insurance cover of Rs 1 lakh and RuPay Kisan card, will also be implemented. (4) Direct Benefit Transfer under various government schemes to the bank accounts of the beneficiaries. STATUS OF FINANCIAL INCLUSION AFTER PMJDY: Phase-I Table:2 Summary of No of Accounts opened under PMJDY at the end of Phase-I (as on 19.08.2015) No. of Accounts No Of No Of Rural Urban Total No. of Accounts Rupay Debit Card Balance In Accounts(In Lacs) Accounts With Zero Adhaar Seeding Balance Public 76124391 62502892 138627283 126990641 1775839.10 62305475 63973255 Sector Bank Rural 27057190 4638159 31695349 23329529 380715.49 14920569 8152355 Regional Bank Private 4180445 2856455 7036900 6195132 108180.24 3204504 2047581 Banks Grand Total 107362026 69997506 177359532 156515302 2264734.83 80430548 74173191 Source: Official website of PMJDY retrieved on 30-12-2016 STATUS OF FINANCIAL INCLUSION AFTER PMJDY: Phase-II Phase II, beginning from 15 August 2015 upto15 August, 2018 will include (1) For defaults in overdraft accounts Credit Guarantee Fund has been created, (2) Micro Insurance and (3) Unorganized sector Pension schemes like Swavlamban. This phase aims to cover households in hilly, tribal and difficult areas in addition, this phase would focus on coverage of remaining adults in the households and students 150

151 Table:3 Summary of No of Accounts opened under PMJDY at the end of Phase-I (as on 24.08.2016) Rural No. of Accounts No Of Total No. Rupay Urban of Accounts Debit Card Balance In Accounts(In Lacs) No Of Accounts With Zero Balance Adhaar Seeding Public 106095034 83279392 189374426 152648245 3309015.38 47080943 99909518 Sector Bank Rural 35626525 5800009 41426534 28731437 717943.0 48752178 16776712 Regional Bank Private 5198462 3264951 8463413 7866016 151994.6 83092609 3530004 Banks Grand Total 146920021 92344352 239264373 189245698 4178953.10 58925730 120216234 Source: Official website of PMJDY retrieved on 30-12-2016 SWOC ANALYSIS OF PMJDY: Strenghts: 1) India has the second largest population in the world and 70% of the population lives in rural areas. This provides a huge platform to the public and private sector banks as the untapped and unbanked rural population can become a big market for the banks in India. 2) Loan benefit against Pradhan Mantri Jan Dhan Yojana: The scheme makes provision for an overdraft of Rs. 5000 to all the Jan Dhan account holders who have completed 6 months as account holders. 3) The upper middle and middle-middle income group in the Indian society who have a good spending power also have a good propensity to save, their savings when tapped can be a strength for the economy. 4) The banking sector of the country is quite big having a large number of players in the form of public and private sector banks. India has 57 Grameen banks with more than 17,000 branches across the country. Thus, with the existence of these specialized banks who already deal with the rural consumer government can easily increase the momentum of financial inclusion. 5) The banking sector of the country is not only strong but has a wide range of financial products to meet the financial demands of upper and middle sections of the society. 6) The population of the country is both a strength and a threat however, from a positive perspective it is more a strength of the country as this population can be made useful in promoting financial inclusion. 7) The co-existence of the banks in both the sectors i.e. in public and private sector is also one of the strength of the economy. Both, banks of public and private sector complement each other in strengthening the financial sector of the economy. 8) The government s target of issuing Adhaar card to almost every Indian by 2016 and the flow of subsidies (DFT) in the accounts opened under Jan dhan Yojana which are Adhaar seeded may increase the reach of banks into the rural households. Also, if these accounts are actively used, the savings in these accounts, however small may increase money with the banks in form of savings. 9) Inclusion of Post offices to act as a bank will help in reaching even the most remote areas of the country as they already have a brick and mortar branch in the most remote areas of the country thus, by using their services the government can save the expenses of opening of new branches in order to reach the unbanked people.

Weaknesses: 1) A majority of population falls in the lower income group who are unable to meet even their basic needs and they are the ones who are to be brought into the purview of financial inclusion through PMJDY. Also, despite so many efforts a number of accounts opened under Jan Dhan have remained dormant with not even a single transaction done within 45 days after opening of the account. 2) The success of financial inclusion depends upon strong technology in terms of network and in terms of reach this is a weak area where a lot of improvement is required. 3) A large section of the rural population needs to be educated about the banking facilities and the availability of different financial products and services. This is a big weakness of the economy. 4) With the banks operating through Business correspondents (BC) who work as representatives of bank to provide basic banking facilities the absence of a brick and mortar branch limits the functioning of the BCs as they do not receive trust and good response from the rural people. 5) Under the BC model the business correspondent is required to report to the affiliated branch at the end of the day which increases the burden of the BCs thus, leading to less attraction amongst BCs to work due to cumbersome process. 6) The BCs have less freedom to work they work as per the terms and conditions of the bank and also, they deal in the limited financial services and products as per instructed by the bank. 7) Absence of different financial products that suit to the needs of weaker and poor sections of the society especially. Opportunities: 1) The large unemployed population in the country can be utilized for promoting financial inclusion by making them a part of the delivery mechanism in the form of business Correspondents (BCs) and business facilitators (BFs) thus the unemployed population of the country can be used for spreading financial literacy and bringing about financial ambit. 2) To know the choices and preferences about the type of financial products required survey s can be undertaken on the targeted group. 3) Effective expansion of existing institutions such as Grameen banks can be used to provide access to financial services to the poor. 6) Existence of NBFCs in the economy can also be used as they like post offices can be used as an engine of promoting financial inclusion.. Challenges: 1) The commission paid to the business correspondents is very less due to which the people working as BCs are neither satisfied nor interested to work as BCs. 2) Educating the huge population falling under the category unbanked belonging to the rural areas of the country, and making them aware of the banking facilities is a difficult task and may pose a challenge and threat to its speed. 3) The indifferent approach of banks especially the private sector banks for opening their branches in rural areas may pose a big challenge. The initiative by these banks lacks willingness. Of the 115 million bank accounts opened 90 million were opened by public sector banks, 4.1 million accounts opened by private sector banks and the rem 152

4) The biggest challenge that the BCs face is the lack of connectivity. Since the BC model rural areas. 5) The percentage of issue of Adhaar cards is very low in the north-eastern part of the country thus connecting bank accounts with the Adhaar card may pose a challenge in these states. 6) As the success of this initiative largely depends up the BCs finding a highly motivated workforce who can act as Business Correspondent competitively is a challenge and retaining them in the profession is a bigger challenge. 7) The large number of dormant accounts under Jan Dhan Yojana if not taken care of may create unnecessary burden on the banks and can reduce the speed of financial inclusions growth. DEMONITISATION AND PMJDY Taking stock of the state of PMJDY during the period of Demonitisation covering a period of 49 days (covering a period from November 9 upto December 28) Table: 4 Summary of No of Accounts opened under PMJDY after Demonitisation (figures in crores) Public Sector Regional Rural Banks Private Sector Banks Banks As on As on As on Nov As on Dec As on As on Nov 9 Dec 28 9 28 Nov 9 Dec 28 No. of PMJDY 20.36 20.90 4.31 4.44 83.79 85.30 accounts Zero- Balance(%) 23.37 24.45 20.26 20.50 36.27 35.01 RuPay cards 77.19 79.32 68.22 74.16 92.70 96.17 issued (%) Aadhaar (%) 55.67 58.66 46.26 50.27 42.76 45.32 Source: Official website of PMJDY retrieved on 30-01-2017 Between November 9 to December 28 more than 3/4th of the 69 lakh new accounts opened during the period under the PMJDY came from PSBs. PSBs added 54.52 lakh new accounts of this 37 lakh were from urban areas alone followed by RRBs with 12.98 lakh under the new PMJDY accounts. However, a majority of the accounts (11.92 lakh) were from rural areas. Though major private sector banks added only 2.28 lakh new accounts during the 49-day period from November 9, the number of accounts came down by 76,885 in rural areas. This led to a total increase of 1.51 lakh new accounts during the period. As on December 28, one-fifth (20.50%) of PMJDY accounts in RRBs, one-third (35.01%) of accounts in private banks and one-fourth (24.45%) in PSBs had zero balance. Private sector banks improved their performance in issuing RuPay debit cards to PMJDY account-holders. By December 28, the percentage of PMJDY accounts with RuPay debit cards in private sector banks increased to 96.17 % as against 92.70 % as on November 9. Even PSBs and RRBs improved their performances in issuing Rupay cards to 79.32 % (77.19%) and 74.16 % (68.22%), respectively, during this period. 153

CONCLUSION: PMJDY has a lot of potential if well implemented and monitored to address the challenges. It s a giant leap towards financial inclusion. The Yojana aims at reaching the unbanked population and protecting them from all kinds of exploitations. Also by developing a culture of savings among large segment of rural population and playing its own role in the process of economic development PMJDY broadens the resource base of the financial system. The philosophy of SAB KA SAATH SAB KA VIKAS not only promotes the role of rural India in the process of growth but also acknowledges the commitment, cooperation, dedication and continuity provided by all the constituents and stakeholders of the society. REFERENCES 1. C. Paramasivan and V. Ganesh kumar (2013) Overview of Financial Inclusion in India Overview of Financial Inclusion in India, International Journals of Management and Development Studies, Vol. 2, March, PP45-49 2. Dr. Anupam Sharma and Ms. Sushmita Kukereja (2013) An Analytical study: Relevance of Financial Inclusion for Developing nations, International Journal of Engineering and Science, PP15-20. 3. Mr. Nanjibhai D. Ranparia (2013) Financial Inclusion in Gujarat: A Study on Banker s Initiatives, International Journal Of Scientific Research, Vol.2, February, PP32-34 4. Pradhan Mantri Jan Dhan Yojana: 5 things you want to know Zee Biz, Sunday, August 31, 2014, 12:39 retrieved from http://zeenews.india.com/ 5. Patel, Amrit (2014): Pradhan Mantri Jan Dhan Yojana Financial Inclusion and Economic Activity A Key to Success, Kurukshetra, MoRD, GOI, New Delhi, Vol. 63, November 2014. 6..Razi, Shahin(2014): Jan Dhan Yojana-National Mission on Financial Inclusion, Kurukshetra, MoRD, GOI, New Delhi, Vol. 63, November 2014. 7..Keshavamurthy, H.R. (2014): Pradhan Mantri Jan Dhan Yojana A Step Towards Sab Ka Sath Sab Ka Vikas, Kurukshetra, MoRD, GOI, New Delhi, Vol. 62, October 2014. 8. http://nrega.nic.in/netnrega/writereaddata/circulars/letter_to_state_pmjdy_02092014.pdf 9. http://www.pmjdy.gov.in/account-statistics-bankwise- table. 154