PRADHAN MANTRI JAN-DHAN YOJANA (PMJDY): A NEW ROUTE OF FINANCIAL AS WELL AS SOCIAL INCLUSION

ISSN: 2249-7196 IJMRR/Oct. 2016/ Volume 6/Issue 10/Article No-10/1443-1451 PRADHAN MANTRI JAN-DHAN YOJANA (PMJDY): A NEW ROUTE OF FINANCIAL AS WELL AS SOCIAL INCLUSION ABSTRACT Punit Kumar Agarwal* 1, Pushpa Yadav 2, Divya Pandey 3 1 Asst. Prof, Ramkrishna Mission Vivekananda University, Ranchi, India. 2 Asst. Prof, College of Agriculture, JAU, Amreli, Gujarat, India. 3 Research Associate, DESM, Division, NDRI, Karnal, Haryana, India. The purpose of this paper is to study all about PMJDY as a financial as well as social inclusion. According to the World Bank social inclusion is the process of improving the ability, opportunity and dignity of disadvantages people on the basis of their identity to take part in society. Experiences in India and abroad has shown that traditional banks have struggled to reach the poor with financial services. Recognizing this fact, many countries such as Brazil, Indonesia, Malaysia, Mexico etc. have allowed non-banks to offer payments, deposits and cash-in/cash-out services. Similarly, in India, enabling an inclusive competitive landscape should be a top priority. In India, about 42 percent of the population lacks access to a formal financial institution such as a bank and is not part of the country s banking system. This population depends on local money lenders for loans which are often given at exorbitant interest rates and unfair terms. This study is focused on the all about PMJDY and how financial inclusion works for socially excluded person. From the analysis we can say that, PMJDY is ray of hopes in achieving financial as well as social inclusion target. But more emphasis need to be given to the hilly areas and places which infrastructure and connectivity constrains so that people in those areas can also be benefitted financially as well as socially from this scheme and they would be able to achieve the target of inclusive growth. Keywords: Financial inculsion, Social exclusion, Inclusive growth, PMJDY, Money lenders. INTRODUCTION Pradhan Mantri Jan Dhan Yojna was announced by Hon'ble Prime Minister, Sh. Narendra Modi on 15 th August, 2014 which is a National Mission for Financial Inclusion. Before launching of this programme several plan for financial inclusion were run by government of India this programme it differs from the earlier financial inclusion plan (Swabhiman). Reserve Bank of India in the year 2006, with the objective of banking service to every household, implemented greater financial inclusion and increasing the outreach of the banking sector with the help of Non Government Organization, Self Help Group and Micro Finance Institution and other Civil Society Organizations as intermediaries in providing financial and banking services through use of "Business Facilitator and Business Correspondent Model" but it did not achieve the target. Census 2011 estimated that out of *Corresponding Author www.ijmrr.com 1443

24.67 crore households in the country, 14.48crore (58.7%) households had access to banking services. Of the 16.78 crore rural households, 9.14 crore (54.46%) were availing banking services. Of the 7.89 crore urban households, 5.34 crore (67.68%) households were availing banking services. In earlier plan the importance were given to coverage of villages while PMJDY focuses on coverage of households. It focuses on coverage of rural as well as urban areas. Earlier plan targeted only villages above 2000 population while under PMJDY whole country is to be covered by extending banking facilities in each Sub-Service area consisting of 1000 1500 households such that facility is available to all within a reasonable distance, say about 5 Km. This scheme will connect every household minimum of one account per family and this translates into opening of 6 crore accounts in villages with the basic banking services facilities i.e. i) Opening of Bank Account with RuPay Debit Card & Mobile Banking facility, (ii) Cash Withdrawal & Deposits, (iii) Transfer, (iv) Balance Enquiry & (v) Mini Statement. The Pradhan Mantri Jan Dhan Yojana (PMJDY) lies at the core of development philosophy of Sab ka sath sab ka vikas. With a bank account, every household gains access to banking and credit facilities. This will enable poor people to come out of the grip of moneylenders, manage to keep away from financial crises caused by emergent needs and most importantly, benefit from a range of financial products. As a first step, every account holder gets a RuPay Debit Card with a Rs. 100000 accident cover. Those opening accounts under PMJDY till January 16, 2015 will also get life insurance cover of Rs. 30,000. In due course they are to be covered by other insurance and pension products. The implementation strategy of the plan is to utilize the existing banking infrastructure as well as expand the same to cover all households. While the existing banking network would be fully geared up to open bank accounts of the uncovered households in both rural and urban areas, the banking sector would also be expanding itself to set up an additional 50,000 Business Correspondents (BCs), more than 7,000 branches and more than 20,000 new ATMs in the first phase. FINANCIAL AS WELL AS SOCIAL INCLUSION According to the World Bank social inclusion is the process of improving the ability, opportunity and dignity of disadvantages people on the basis of their identity to take part in society. Whereas inclusive financing is the delivers of financial service at affordable costs to section of disadvantaged and low income segments of society. Financial inclusion is a key determinant of sustainable and inclusive growth, which could unlock the vast hidden potential of savings, consumption and investment propensities of poorer section of the society. An inclusive financial system enables overall growth of an economy and can help curb the growth of informal sources of credit (such as moneylenders) which are often found to be explitative. (Sudha V, 2011). So for strengthening the social inclusion, financial inclusion worked as a effective tools. The main theme of eleventh five year plan (2007-2012) was inclusive growth which emphasizes on inclusive (financial as well as social) growth with enabling the marginalised group (dalit, tribals, primitive tribal groups, landless marginal labour and other deprived classes) of the society to actively participation in the economic development of the country. This can be made possible through successful implementation of Copyright 2016 Published by IJMRR. All rights reserved 1444

financial inclusion which involves the delivery of financial services at a sustainable cost to the vast segments of low income and disadvantaged groups. (Patnaik et al. 2015). In India, with the growth of population the banking industry is also continuously growing in horizontal and vertical manner. The branch penetration in rural areas has not kept pace with the rising demand and the need for accessible financial services. Government did nationalization of bank in 1969 and 1980 for concentration in needy areas but after three decades of nationalization rationale was to shift the focus from class banking to mass banking. Money lenders in rural areas and urban slums still continue to exploit the poor. After economic reforms of 1991, it s not in the best interest of the country to not include the poor in the growth paradigm. Financial Inclusion of the poor will help in bringing them to the mainstream of growth and would also provide the financial institutions an opportunity to be partners in inclusive growth. Experiences in India and abroad has shown that traditional banks have struggled to reach the poor with financial services. Recognizing this fact, many countries such as Brazil, Indonesia, Malaysia, Mexico etc. have allowed non-banks to offer payments, deposits and cash-in/cash-out services. Similarly, in India, enabling an inclusive competitive landscape should be a top priority. The efforts to include the financially and socially excluded segments of the society into formal financial system in India are not new. The concept was first mooted by the Reserve Bank of India in 2005 and Branchless Banking through Banking Agents called Bank Mitr (Business Correspondent) was started in the year 2006. In the year 2011, the Government of India gave a serious push to the programme by undertaking the "Swabhiman" campaign to cover over 74,000 villages, with population more than 2,000 (as per 2001 census), with banking facilities. PMJDY focuses on coverage of households as against the earlier plan which focused on coverage of villages. It focuses on coverage of rural as well as urban areas. Earlier plan targeted only villages above 2000 population while under PMJDY whole country is to be covered by extending banking facilities in each Sub-Service area consisting of 1000 1500 households such that facility is available to all within a reasonable distance, say about 5 Km. So in nutshell we can say PMJDY is a better and effective tool of financial inclusion as comparison to earlier plans and schemes for social inclusion. How PMJDY Scheme differ from earlier approach of financial inclusion S. No. Earlier approach (Swabhiman) New approach (PMJDY) 1 Villages with population greater than 2000 Focus on household; Sub Service Area (SSA) for covered; thus limited geographical coverage of the whole country. coverage 2 Only rural Both rural and urban 3 Bank Mitr (Business Correspondent) was visiting on fixed days only Fixed point Bank Mitr (Business Correspondent) in each SSA comprising of 1000-1500 households(3 to 4 villages on an average) to visit other villages in the SSA on fixed days 4 Offline accounts opening - Technology Only online accounts in CBS of the Bank lock-in with the vendor 5 Focus on account opening and large number of accounts remained dormant Account opening to be integrated with DBT, credit, insurance and pension 6 Inter-operability of accounts was not there Inter-operability through RuPay Debit Card, AEPS etc. 7 No use of Mobile Banking Mobile wallet and USSD based mobile banking to be utilized Copyright 2016 Published by IJMRR. All rights reserved 1445

8 Cumbersome KYC formalities Simplified KYC/e-KYC in place as per RBI Guidelines 9 No guidelines on the remuneration of the Minimum remuneration of the Bank Mitr (Business Bank Mitr (Business Correspondent). Correspondent) to be ` 5000/-( Fixed+ Variable) Banks went generally with Corporate BCs who used to be least expensive to them 10 A recent RBI survey finds that 47% of Bank Mitr are untraceable Viability and sustainability of Bank Mitr (Business Correspondent) is identified as a critical component 11 Monitoring left to banks Financial Inclusion campaign in Mission Mode with structured monitoring mechanism at Centre, State and District level 12 Financial literacy had no focus The rural branches of banks to have a dedicated Financial Literacy Cell 13 No active involvement of states / districts State level & District level monitoring committees to be set up 14 No brand visibility of the Programme & BankMitr (Business Correspondent) Brand visibility for the programme & Bank Mitr (Business Correspondent) proposed 15 Providing credit facilities was not OD limit after satisfactory operations / credit history encouraged of 6 months 16 No grievance redressal mechanism Grievance redressal at SLBC level in respective states Source- http://www.pmjdy.gov.in SIX BASICS PILLARS OF PMJDY 1. Universal access to banking facilities: 2. Providing Basic Banking Accounts with overdraft facility and RuPay Debit card to all households: 3. Financial Literacy Programme: 4. Creation of Credit Guarantee Fund: 5. Micro-Insurance: 6. Unorganized sector Pension schemes like Swavalamban PROBLEM STATEMENT In India, about 42 percent of the population lacks access to a formal financial institution such as a bank and is not part of the country s banking system. This population depends on local money lenders for loans which are often given at exorbitant interest rates and unfair terms. Without access to a basic bank account, facilities such as insurance cover and debit cards remain a far cry to this section of the population. The PM Jan Dhan Yojana is set to change this scenario. In the long term, this scheme will also provide the backdrop for a cashless economy. If an individual person is connected with banking services means it succeeds the process of social inclusion. So for social inclusion, financial inclusion is inevitable process. OBJECTIVE OF THE STUDY The main objective of this paper is to examine the progress of Pradhan Mantri Jan-Dhan Yojana SCOPE/LIMITATION OF THE STUDY The study is based on secondary data and its limited to zone wise progress of PMJDY Copyright 2016 Published by IJMRR. All rights reserved 1446

The scope includes rural and urban household having banking services and public/ private sector banks REVIEW OF LITERATURE The review of literature helps us in clearly understand the depth of the study through studies conducted in past, regarding their place, period and methodology. Patnaik et al (2015) The author in this research paper has attempted to study the level of financial access to banking services of the urban unorganised workforce and the reason for not accessing banking services in eastern region of India particularly in Odisha and found that most of the respondents have very little saving and they do not have an idea to open a bank account. Poor knowledge of the available banking services was one of the main constraints in linking with bank. Kunthia R (2014) The author studied the recent developments on Financial Inclusion in India with special reference to the recently launched PMJDY. The author has presented an analysis of its different important areas, the roadblocks in the process and has suggested strategies to attain universal coverage of the PMJDY for the underprivileged population and the large unbanked areas of the country. Lamba and Gupta (2011) studied on recent trends in financial Inclusion in India and found that while granting loans most of the banks evaluate the assets owned by the concerned person which the poor people don t have. So the bank should evaluate the capability of the person who is taking that loan. This will inculcate a confidence in poor people that they are also credit worthy and able to return loans. HYPOTHESIS Pradhan Mantri Jan-Dhan Yojana has a positive impact on financial inclusion METHODOLOGY For achieving the objective of study, secondary data have been used and analysed through descriptive statistics. Data type: For the purpose of this study we have used secondary data state wise and clubbed it in to zone. The data was collected from different sources like Census 2011, magazine, Journal and government website. The states which was clubbed in to zone as given below: Northern zone comprising of states (Haryana, Himanchal Pradesh,Jammu and Kashmir, Punjab, Uttar Pradesh and Uttarakhand) Eastern zone comprising of states (Bihar, Jharkhand, Orissa and West Bengal) Western Zone comprising of sates of (Goa, Gujarat, Maharashtra and Rajasthan) Southern zone comprising of states (Karnataka, Kerala, tamil Nadu and Telangana) Central Zone comprising of states (Chhattisgarh and Madhya Pradesh) North Eastern zone comprising of states (Manipur, Meghalaya, Sikkim, Arunachal Pradesh, Nagaland, Tripura and Mizoram) Copyright 2016 Published by IJMRR. All rights reserved 1447

Union Territories included states (Chandigarh, delhi, Puducherry, Andaman and Nicobar, Dadra and Nagar Haveli, Daman and Diu and Lakshwadeep) Data Analysis: The data was subjected to both quantitative and qualitative analysis. The quantitative analysis resulted in descriptive statistics mean, percentages and bar diagrams. RESULTS AND DISCUSSION Pradhan Mantri Jan Dhan Yojana- Progress up to January 2015 Since its inception, the total number of accounts opened till 16 January 2015 were 1143 lakhs out of which 79 percent account were in public sector banks, 18 percent in RRBs and rest 3 percent in private banks (table1). Out of the accounts opened in public sector bank, 54 percent comprised of rural sector and 46 percent of urban sector. Account of rural household in RRB was 85 percent and that of urban household was 15 percent. In private banks 54 percent rural households and 46 percent urban households have opened their accounts under this scheme. Table 1: Pradhan Mantri Jan - Dhan Yojana (Accounts Opened As on 16.01.2015) S. No. Banks No. of account in lakh No. of Balance No of A/C Rural Urban Total rupay debit in account with zero card in lakh (lakh) balance (lakh) 1 Public sector bank 490.98 415.6 906.57 835.12 708951.80 649.92 2 RRB 170.27 30.18 200.45 121.08 143848.19 150.03 3 Private bank 19.25 16.75 36 27.57 50490.37 24.09 Total 680.50 462.53 1143.02 983.77 903290.36 824.04 Source- Compiled from statistics of PMJDY The number of account with zero balance was 824.04 lakhs as on 16 January2015 comprising of 79 per cent in public sector banks, 18 percent in RRBs and the rest 3 percent in private sector banks. So government and RBI should take initiative for private bank through which more number of people should be connect with private bank. Table 2: Progress of PMJDY in India state wise/zone wise up to 16 Jan. 2015 S. No. Zone A/Cs (Rural) A/Cs (Urban) Total Accounts Aadhar Seeded Aadhaar Seeded (%) Rupay- Card Issued Rupay Card (%) Deposits (In Lacs) 1. North 16924833 10435068 27359901 7405497 2.283 23405507 4.8255 299075.5 2. East 15241248 6914884 22156132 5001993 1.19 18404015 3.3331 179580.5 3. West 11272499 9362987 20635486 9045145 1.815 18787019 3.6838 163220.1 4. Central 7398916 6093990 13492906 3674085 0.4682 10699597 1.5061 45577.68 5. South 10056408 7462095 17518503 9003264 2.1284 15267637 3.4845 121459.8 6. North 638625 405097 1043722 321008 1.7975 845675 5.5149 9236.57 East 7. U.T 364041 2032483 2396524 1486772 3.4594 2199261 6.1251 31884.81 Source: Compiled from statistics of PMJDY As on 16 Jan 2015, total account opened in Northern zone (comprising of states of Haryana, Himanchal Pradesh,Jammu and Kashmir, Punjab, Uttar Pradesh and Uttarakhand) was 27359901, in Eastern zone (comprising of states of Bihar, Jharkhand, Orissa and West Bengal) was 22156132, in Western Zone (comprising of sates of Goa, Gujarat, Maharashtra and Rajasthan) was 20635486, in Southern zone (comprising of states of Karnataka, Kerala, TamilNadu and Telangana) was 17518503, in Central Zone (comprising of states of Chhattisgarh and Madhya Pradesh) was 13492906, in North Eastern zone(comprising of Copyright 2016 Published by IJMRR. All rights reserved 1448

states of Manipur, Meghalaya, Sikkim, Arunachal Pradesh, Nagaland, Tripura and Mizoram) was 1043722 and Union Territories (Chandigarh, delhi, Puducherry, Andaman and Nicobar, Dadra and Nagar Haveli, Daman and Diu and Lakshwadeep) was 2396524 (table 2). In the Northern Zone, most accounts were opened in the state of Uttar Pradesh both in rural as well as urban areas (65 percent and 66 percent respectively) and thus has a the highest deposit in the accounts. Himanchal Pradesh and Uttarakhand being the hilly states, less number of accounts have opened as of 14 Jan 2015. In the Eastern zone high number of accounts was open in Bihar and West Bengal and the deposit was high in both the states. Highest number of accounts opened in western zone was in the state of Rajasthan both in rural and urban areas (45 percent and 35 percent respectively) followed by the state of Maharashtra. Karnataka in Southern zone had highest number of account opened. Madhya Pradesh in Central zone, Tripura in North Eastern zone and Delhi had highest number of account openings. Fig. 1: Progress of Account Opening in Rural, Urban area under PMJDY in India zone wise up to January 2015 (Source: Compiled from statistics of PMJDY) The account opened under PMJDY was highest in rural areas in each zone except U.T. and the differences of rural and urban was narrowly in north east zone while highest in eastern part of the India. So, more emphasis need to be given to the hilly areas and places which infrastructure and connectivity constrains so that people in those areas can also be benefitted from this scheme. Fig. 2: Household having access to India s banking services (Source- Census 2011 (GOI)) Copyright 2016 Published by IJMRR. All rights reserved 1449

According to Census 2011 out of 24.67 crore household in the country, 14.48 crore household (59 percent) had access to banking services in 2011 which was just 6.82 crore in 2001 showing an increase of 112 percent access to banking services (fig.1). Rural Households had higher access than urban households in 2001 as well as 2011. From 2001 to 2011, the financial access also increased more in rural household (120 percent) as compared to urban household (97 percent). This means that rural households comprise a significant part in India s banking services. SUGGESTIONS AND CONCLUSION In PMJDY account is opened with zero balance which will attract the masses in connecting with bank and it will also reduce the dependency of the marginalised section on informal source of credit. Under PMJDY there is a provision of Rupay debit card, this card is accepted at all ATMs (for cash withdrawal) and at most of the PoS machines (for making cashless payment for purchases) in the country and the special feature of Rupay card is to provides accidental insurance cover upto Rs.1.00 lac without any charge to the customer. If possible, bank should launch a mass campaign for opening bank accounts outside the banking premises so that maximum people get benefited. PMJDY is ray of hopes in achieving financial inclusion target. we can also conclude from the analysis of the data that out of the total account opening progress Chattisgadh, Madhya Pradesh (Central Zone) and north east zone people have very small number of bank account under PMJDY. So, more emphasis need to be given to the hilly areas and places which infrastructure and connectivity constrains so that people in those areas can also be benefitted financially as well as socially from this scheme and they would be able to achieve the target of inclusive growth. The people should be made aware about the various scheme and programs framed by the government for them. Awareness should be imparted to all the people without any discrimination on the grounds of sex, colour, caste, creed etc. Financial inclusion makes the people to enable for services which they were not able to access earlier. So they would be linked with elite section of society which will make the people financially as well as socially strong. REFERENCES [1] Kunthia R. Pradhan Mantri Jan Dhan Yojna: A new drive towards financial inclusion in India. International Journal of Business Economics and Management Research 2014; 4(11): 10. [2] Lamba R, Gupta ML. Recent Trends in Financial Inclusion in India, Inclusive growth and microfinance access, Macmillan Publishers India, 2011; 12-25. [3] Patnaik BCM, Satpathy I, Supkar AC. Pradhan Mantri Jan Dhan Yojna: A new direction for mainstreaming the financially excluded. International Journal of Management 2015; 6(2): 31-42. [4] Pradhan Mantri Jan Dhan Yojana. Retrieved from the Pradhan Mantri Jan Dhan Yojana, 2015. http://www.pmjdy.gov.in/scheme_detail.aspx [5] Sudha V. Financial Inclusion Process in India and its Constraints, Inclusive growth and microfinance access, Macmillan Publishers India, 2011; 3-11. Copyright 2016 Published by IJMRR. All rights reserved 1450

[6] www. Mapsofindia.com [7] www. Socialjusticehry.gov.in [8] www.census 2011.co.in [9] https://www.sbi.co.in/portal/web/customer-care/-faq-pradhan-mantri-jan-dhan-yojanapmjdy Copyright 2016 Published by IJMRR. All rights reserved 1451