IRACST International Journal of Commerce, Business and Management (IJCBM), ISSN: 23192828

Vol. 5, No.1, Jan-Feb 2016

The Game Changer Pradhan Mantri Jan Dhan Yojana (PMJDY)

Progress and Strategies to Make it a Success
Bijoyata Yonzon
Assistant Professor, Department of Economics
Janaki Devi Memorial College, University of Delhi
bijoyatayonzon@gmail.com

*Peerzadah Mohammad Oveis

Research Scholar,Deptt.of Banking Technology
Pondicherry University
peeroveis@gmail.com

Abstract:Financial inclusion has been a buzz-word

financial inclusion plan with the objective of covering

for the policy makers and governments for a long

all households in the country with banking facilities

time. Attempts have been made by the RBI and

along with inbuilt insurance coverage. The purpose

Government to bring large unbanked chunk of the

is to accelerate growth, fight poverty effectively and

rural population within the banking system. Inclusive

to empower the last man in the last row in Indian

growth is impossible without financial inclusion and

economy. Amid this background, the present paper

financial inclusion is the essence for the sustainable

endeavours to study the recent trends in financial

economic growth and development of the country.

inclusions in India with special reference to PMJDY,

Without Financial Inclusion we cannot think of

analysis of its different key areas and the strategies

economic development because a large chunk of total

for making it a success to ensure maximum financial

population remains outside the growth process. One

inclusion for the underprivileged and unbanked

of the main reasons of poverty in India is financial

areas.

exclusion also. Though there are few people who are

enjoying all kinds of services from savings to net
banking, but still in our country around 40% of
people lack access to formal financial system and
even to basic banking services like savings, credit

Keywords: Banking System, Financial Inclusion,

Inclusive Growth, Pradhan Mantri Jan Dhan Yojana
and Sustainable Economic Growth.
1.0 Introduction:

and insurance facilities. India is second only to

China in the number of people who are excluded

Despite making significant improvements in the areas

from formal financial facilities. Bringing every

relating to financial viability, profitability and

village at large and every household in particular

competitiveness, there are concerns that banks have

within the grasp of the banking system there has been

not been able to include vast segment of the

an on-going process for it which has been started

population, especially the underprivileged sections of

more than a decade ago by the introduction of no

the society, into the fold of basic banking services.

frills

Indian

The Reserve bank of India and the government have

government has packaged it in a mission mode and

come with a lot of schemes and strategies for

made it an achievable target in the form of PMJDY.

including the unbanked section of the population.

In order to reduce the degree of financial

Recently a new scheme, Pradhan Mantri Jan Dhan

untouchability the new government has come up

Yojana was launched as a national mission for

with a big bang action plan which is popularly known

financial inclusion in order to ensure financial

as Pradhan Mantri Jan-Dhan Yojana. It is a mega

inclusion for weaker and underprivileged sections of

account.

However,

the

present

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IRACST International Journal of Commerce, Business and Management (IJCBM), ISSN: 23192828
Vol. 5, No.1, Jan-Feb 2016

the society. The scheme was launched to provide

making cash payments. This laudable effort is

banking, insurance and pension services to mitigate

expected to reduce governments subsidy bill (as it

the ill effects of earlier schemes and giving dignity,

will save that part of the subsidy that is leaked) and

financial freedom and financial stability to the

provide relief only to the real beneficiaries. All these

weaker sections of the population. Within the grasp

efforts require an efficient and affordable banking

of the banking system there has been an ongoing

system that can reach out to all.

process started a decade ago. The policy makers in

2.0 Objectives of the Study:

India have been focusing on financial inclusion of

rural and semi-rural areas, primarily for three most

1. To understand the need and progress of Financial

pressing needs:

inclusion through PMJDY in Indian context.

1.Creating a platform for inculcating the habit to

2. To identify the proposed strategies for successful

save money The lower income category has been

implementation of this scheme of national priority.

living under the constant shadow of financial distress

mainly because of the absence of savings. The

3.0 Development of Financial Inclusion in Recent

absence of savings makes them vulnerable. Presence

years Before Launch of PMJDY:

of banking services and products aim at providing a

Due to RBIs concerted efforts since 2005, the

critical tool to inculcate the habit to save. Capital

formation in the country is also expected to be
boosted

once

financial

inclusion

measures

number of branches of Scheduled Commercial Banks

increased manifold from 68,681 in March 2006 to
1,02,343 in March 2013.

materialize, as people move away from traditional

modes of parking their savings in land, buildings,

In rural areas, the number of branches increased

bullion, etc.

from 30,572 to 37,953 during March 2006 to March

2013. As compared with rural areas, number of

2.Providing formal credit avenues So far the

branches in semi-urban areas increased more rapidly.

unbanked population has been vulnerably dependent

on informal channels of credit like family, friends

Total number of banking outlets in villages

and moneylenders. Availability of adequate and

increased from 67,694 in March 2010 to 2,68,454 in

transparent credit from formal banking channels shall

March 2013 (increased around 4 times during the

allow the entrepreneurial spirit of the masses to

period of three years) of total branches, banking

increase outputs and prosperity in the countryside. A

outlets through BCs increased from 34,174 to

classic example of what easy and affordable

2,21,341 during the same period (increased around

availability of credit can do for the poor is the micro-

6.5 times).

finance sector.
The number of Basic Savings Bank Deposit
3.Plug gaps and leaks in public subsidies and

Accounts opened increased from 73.45 million in

welfare programmes Government is pushing for

March 2010 to 182.06 million in March 2013.RBI

direct cash transfers to beneficiaries through their

advised banks to provide small overdrafts in BSBD

bank accounts rather than subsidizing products and

accounts. Accordingly up to March 2013, 3.95

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IRACST International Journal of Commerce, Business and Management (IJCBM), ISSN: 23192828
Vol. 5, No.1, Jan-Feb 2016

million BSBD accounts availed OD facility of Rs.

2. Providing Basic Banking Accounts with overdraft

1.55 billion (These figures respectively, were 0.18

facility of up to Rs. 5000/-.

million and 0.10 billion in March 2010).

3. RuPay Debit Card with inbuilt accident insurance
Banks have been advised to issue KCCs to small
farmers for meeting their credit requirements. Up to
March 2013, the total number of KCCs issued to

cover of Rs. 1 lakh.

4. Financial Literacy Programme.

farmers remained at 33.79 million with a total

Phase Two (from 15 Aug 2015 -14 Aug 2018)

outstanding credit of Rs.2622.98 billion.

proposes the following:

Banks have been advised to introduce General

1. Creation of Credit Guarantee Fund for coverage of

Credit Card facility up to Rs. 25,000/- at their rural

defaults in overdraft accounts.

and semi-urban branches. Up to March 2013, banks

had provided credit aggregating to Rs.76.34 billion in
3.63 million GCC accounts.
4.0 Action Plan of Pradhan Mantri Jan Dhan
Yojana:
The newly elected NDA government came with an
innovative idea of connecting people especially from

2. Micro Insurance.
3.Unorganized

sector

Pension

schemes,

like

Swavlamban.
4. Coverage of households in hilly, tribal and difficult
areas, and coverage of remaining adults in the
households and students.

rural and remote areas with banking industry by

5. Perhaps, financial inclusion through PMJDY will

launching Pradhan Mantri Jan-Dhan Yojana. The

commence the next revolution of growth and

vision of government is economic liberalization and

prosperity.

opportunities of development and growth of India

with the help of micro financing. The National

5.0 Process and Progress of Pradhan Mantri Jan

Mission on Financial Inclusion (NMFI) is proposed

Dhan Yojana:

to be implemented as a Mission Mode Project which

has an integrated approach for providing banking,
insurance and pension products together to the
beneficiary. It also envisages a comprehensive
coverage of all excluded households in the country in
two phases:

PMJDY 2014 is a comprehensive financial inclusion

programme, targeting opening of 7.5 crore new
accounts within five months with insurance and
pension facilities. BCs are employed in places where
banks do not have branches. The target under
PMJDY is for banks to have an additional 50,000

Phase One (from 15 Aug 2014 -14 Aug 2015)

BCs, in addition to 7,000 more branches and 20,000

proposes the following:

new ATMs. Also to make the dormant accounts

(estimated at around 5 crore) active, the government

1. Universal access to banking facilities.

may soon announce that dormant account holders, if

found eligible, will get subsidies and other payments
related to Direct Benefit Transfer (DBT) as well as

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IRACST International Journal of Commerce, Business and Management (IJCBM), ISSN: 23192828
Vol. 5, No.1, Jan-Feb 2016

the National Rural Employment Guarantee (NREGA)

cover of Rs.1 lakh being offered to new account

Scheme directly into their accounts if these accounts

holders, it comes with the condition that before

are activated. Such account holders will also get

making the claim, the holder should have used his/her

accidental insurance worth Rs. 1 lakh, overdraft of

account during 45 days prior to the claim date. To

upto Rs. 5,000 and life insurance of Rs 30,000. The

cover defaults of overdraft facility of upto Rs. 5000,

RuPay debit card being given to the beneficiaries will

the Govt. is likely to set up a Credit Guarantee Fund

have an inbuilt accident insurance cover of Rs. 1 lakh

of Rs. 1,000 crore, which is likely to be set up after

and an overdraft facility upto Rs 5,000.

August 2015. The overdraft facility is only for

Aadhaar enabled accounts after they have operated

The use of debit cards will allow the unbanked to

satisfactorily for six months. Banks have been asked

start building a transaction history, which can be a

by the Govt. to assess the creditworthiness of people

decisive step in initiating them towards financial

before opening accounts so that they do not misuse

inclusion. This step will also help the Banks in better

the overdraft facility. Banks have also been asked to

product designing and targeting. The PMJDY also

link new accounts to the Aadhaar Card number, take

aims at eliminating corruption as it would facilitate

self-declaration on creditworthiness and other details,

routing of subsidies directly into the accounts of

and make sure that accounts are active. Wrong self-

intended beneficiaries. On the accident insurance

declaration can lead to legal action.

Table No.1 Pradhan Mantri Jan - Dhan Yojana (Accounts Opened as at 13.01.2016)
(All Figures in Crore)

Bank
Name

RURAL

URBAN

TOTAL

NO OF
RUPAY
CARDS

AADHAARR
SEEDED

BALANCE IN
ACCOUNTS

% OF ZEROBALANCEACCOUNTS

Public

8.81

7.04

15.85

13.75

7.38

23753.97

31.81

Regional

3.09

0.51

3.60

2.61

1.03

5203.45

27.41

Private

0.45

0.29

0.74

0.70

0.23

1151.03

39.89

Total

12.35

7.84

20.19

17.05

8.64

30108.45

31.32

Source: PMJDY official site.

side of opening accounts but also saving in these

accounts.

The scheme has achieved a great success by opening

20.19 crores of bank accounts with a focused

6.0 Strategies for making PMJDY a Success:

approach on rural areas where the total accounts

opened stood at 12.35 crore. The RuPay debit cards
issued to those account holders also stood at 17.05
crore with a balance of 30108.45 crores in these
accounts which shows the success not only on the

The success of PMJDY will largely depend on

reaching the poorest of the poor in the country and
end financial untouchability, in a country where 25
per cent of the people live with an income of less -

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IRACST International Journal of Commerce, Business and Management (IJCBM), ISSN: 23192828
Vol. 5, No.1, Jan-Feb 2016

PMJDY should integrate with Aadhaar to leverage on

the existing reach and ensure unique financial
than INR 40 a day. The critical aspect of PMJDY is
the delivery of banking services to the un-banked and
under-banked

considering

the

constraints

of

broadband connectivity, technology and financial

literacy. The immediate need is to build economic
activity around un-banked/underbanked villages so
that the newly opened bank accounts remain active
with regular transactions.

identities. Banks can act as registrars for Aadhaar

enrollments and ensure that the seeding of Aadhaar
numbers in accounts should be given priority for
Direct Benefit Transfer. In order to increase Aadhaar
seeding & enrollment, an enrollment counter should
be set-up wherever account opening camps are
organised. Other modes of seeding like SMS, ATM,
Internet Banking, planned Call / communication to
the customers on Aadhaar seeding should also be

6.1 Reaching the poorest

utilized.
It is not economically viable for banks to provide
banking services to the unbanked by opening
physical branches, especially in the rural areas. Even
when economically viable, it is not feasible due to
lack of network connectivity, power backup, lack of
electricity supply, among others. Hence, banks are
increasingly embracing the use of branchless banking
by providing banking services such as opening of
bank account, cash deposit, cash withdrawal through
a

Business

Correspondent

(BC).

Bank

Correspondent (BC) with a minimum salary of INR

5,000 and additional incentives typically perform the
functions to acquire customers and manage cash in/
cash out services for the customers. The BC who is to
provide banking services needs to be equipped with
the required IT infrastructure viz. Micro ATM, biometric scanners, etc. Technology infrastructure in
India suffers due to connectivity and literacy issues
leading to non-optimal utilization of resources
available. Banks, the Government and rest of the
stakeholders will have to invest in technology
solutions that ensure uninterrupted delivery of
banking services to the rural masses.
6.2 Embracement of Aadhaar

6.3 Keeping the Account active

The overdraft facility provided to customers after 6
months of opening the account, will help liberate the
poor people from the clutches of the local money
lenders. The provision of the overdraft facility will
largely depend on the banks satisfaction to extend
the same. There should be a guidance and mandatory
policy by the RBI to the Banks for extending
overdraft facility to the customers. Transfer of
subsidies to the poor should be routed through these
accounts so as to ensure that these accounts continue
to have deposits and can remain live; this can reduce
the number of dormant accounts. The cost of
overdraft facility might not get repaid leading to
losses to banks; hence there is a need for integrating
with NREGA and LPG subsidies to ensure direct
deposits into these accounts. As per the FIBAC
survey, only 27 per cent of Basic Savings Basic
Deposit (BSBD) accounts are active (with a
minimum one transaction in last one year). The main
deterrent was difficulty in conducting transactions,
resulting in the accounts becoming dormant or active
with low balances. To encourage regular transactions,
the cash-in and cash-out mechanisms should be easy

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IRACST International Journal of Commerce, Business and Management (IJCBM), ISSN: 23192828
Vol. 5, No.1, Jan-Feb 2016

to understand and operate. Keeping this in mind,

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initiative for financial inclusion organized by DFS

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Govt. of India March 22 : 22-26.

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a dampener. Mobiles can be a key enabler for
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[2] Gujarathi D (2012) Analysis of Various Initiatives

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Overview

7.0 Conclusion:

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financial system by developing a culture of savings
among large segment of rural population and plays its

[4] PMJDY (2014) Progress Report retrieved on 27th

Nov 2014 from http://www.pmjdy.gov.in

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[5] RBI (2011) Credit Delivery and financial

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Subbarao

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[8] Hussain. A (2015) Pradhan Mantri Jan Dhan

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