AEGAEUM JOURNAL ISSN NO: 0776-3808 Pradhan Mantri Jan Dhan Yojana as an Instrument of Financial Inclusion: A Review Subha Kumar Das Department of Commerce, Gauhati University [email protected] Abstract - Financial inclusion means the delivery of financial services at an affordable cost to all sections of the society which are disadvantaged and those who fall in the low income segments of the society. One of the main reasons of backwardness of the different sections of our society can be attributed to the lack of access to basic financial systems. The formal financial sectors have not been able to reach the poorer sections of the society especially in the villages. The Prime Minister’s Jan Dhan Yojana is a step taken forward towards the financial inclusion program and is an effort to bring the unbanked sections of our society directly under the formal banking system.This paper highlights the process through which this scheme has been implemented and to what extent it has been able to cover the targeted sections in India. This paper also tries to highlight the implications of this scheme and the challenges and issues regarding this scheme. Keywords : Financial inclusion, Pradhan Mantri Jan Dhan Yojana, formal banking system. 1. INTRODUCTION Prime Minister, Shree Narendra Modi announced the Pradhan Mantri Jan Dhan Yojana or the Prime Minister ‘Scheme for people’s wealth’- an ambitious scheme for comprehensive financial inclusion on his first Independence Day speech on 15 th August, 2014.This Mission enabled all households, urban andrural to gain easy and universal access to financialservices. The scheme is a financial inclusion scheme covering all households in the country with banking facilities, ensuring a bank account for each household. The scheme was formally launched on 28 th August, 2014 with a target to provide universal access to banking facilities starting with Basic Banking Account with an overdraft facility of Rs. 5,000 after six months. This limit has been increased to Rs 10,000 w.e.f. 14.08.2018 and RuPay Debit Card with inbuilt accident insurance cover of Rs. 1,00,000 which has been increased to Rs 2,00,000 for cards issued after 28.08.18 and a RuPay Kisan Card. Those people who opened their bank accounts before 26 th January, 2015 gained an additional benefit of Rs. 30,000 life insurance. The beneficiaries who already have bank accounts are also eligible to get these benefits. With a bank account, every household would gain access to banking and credit facilities. This enabled them to come out of the grip of moneylenders and manage to keep away from financial crises caused by emergent needs, and most importantly, benefit from a range of financial products. The main reason for the introduction of this scheme is to eradicate the problem of ‘financial untouchability',that is, to include those people who have not come under the domain of formal financial sector of the country. Financial inclusion or inclusive financing is the delivery of financial services at an affordable cost to the disadvantaged sections of the society. The formal financial sectors have not been able to reach the poorer sections of the society especially in the villages. The Prime Minister’s Jan Dhan Yojana is a step taken forward towards the financial inclusion to reach out to those people who have no formal bank accounts. 2. REVIEW OF LITERATURE Razi (2014) highlighted the main issues regarding this scheme and had drawn out the main points as to why financial addition is necessary for the development of our country. Patel (2014) considered that this scheme provides social security through insurance cover and pension payment and this is a very significant one because there are not even elementary social security covers for a very large number of poor households and is a blessing for the daily wage earners. Sahoo (2014) emphasised on the fact that to complete the mammoth task of providing bank accounts to 75 million households, the banks should improve their infrastructure facilities because the existing bank branches are not enough. The banks need to extend their branches to the interior villages so that 1 Volume 8, Issue 9, 2020 http://aegaeum.com/ Page No: 1361 AEGAEUM JOURNAL ISSN NO: 0776-3808 rural households can access the facilities and increase the number of ATMs. Kaur and Singh (2015) argued that setting up of biometric ATMs in rural areas for the catering to the needs of illiterate people will help these people avail the facilities along with new recruits from the local areas because the local people can relate to someone from their own area and who can understand their problems more properly. There are certain writers who feel that the scheme Jan Dhan Yojana is an improvement over the other such schemes those were started before Jan Dhan Yojana. Razi (2014) believed that the Pradhan Mantri Jan Dhan Yojana is a significant improvement over the UPA government’s financial inclusion programme. The previous scheme had no focus on households and the Know Your Customer norms were also very restricting. Patel (2014) is also of the view that this scheme is more effective than previous schemes because this scheme targets households instead of villages, covers both rural and urban areas as against rural ones and has also given importance to technology . Borman and Kashyap (2019) have found in their study that environmental factors play a positive role in enhancing financial capability of beneficiaries under Pradhan Mantri Jan Dhan Yojana (PMJDY). It is seen that it can act as barrier as well as enabler in building an individual’s financial capability as environmental factors are the most vital factors among all the factors of financial capability. With the help of PMJDY account people are getting the various benefits of Government schemes like Ujjala Yojana, Pradhan Mantri Kisan Pension Yojana, Suknya Samriddhi Yojana, Pradhan Mantri Jeevan Jyoti BimaYojana, Pradhan Mantri Surakshya Bima Yojana, Kisan Samman Nidhi, Ayushman Bharat Yojana directly in their bank account. It is a great step towards making the people of the society financially stable and strong. 3. OBJECTIVES The main objectives of this paper are pointed out as follows: • To study theimplementation of this scheme. • To understand the current scenario of financial inclusion. • To study the implications of the scheme. • To highlight the necessary issues and challenges of this scheme. 4. SOURCES OF DATA COLLECTION The study is based on secondary data which has been collected from the Government journals, newspaper articles, magazines, banks web sources. 5. FINDINGS FROM THE STUDY 5.1 Implementation of the scheme The main objective of PMJDY is inclusive growth - “Sab ke sath, Sab ka Vikash”. This program enables all households, both rural and urban to gain easy access to formal financial services, especially the weaker and the neglected sections of our society who are dependent on informal sources like the money lenders to meet their short and long term needs. Under this program, the households of our country have access directly to the formal financial sectors. The households not only have bank accounts but also access to credit for economic activity, insurance and pension schemes. The PMJDY was implemented in two phases- 2 Volume 8, Issue 9, 2020 http://aegaeum.com/ Page No: 1362 AEGAEUM JOURNAL ISSN NO: 0776-3808 • In the first phase, 15 th August, 2014 to 14 th August, 2015, all households were covered with at least one basic bank account and routing of subsidies to such accounts under Direct Benefit Transfer (DBT) scheme. The total number of accounts opened in the first phase is shown in the following table: Table 1 Number of accounts opened under PMJDY during PHASE-I Sl Types of No. Of accounts opened No. Of RuPay Balance in No. Of No. Banks (in crores) Debit cards( in accounts(in accounts Rural Urban Total crores) crores) with 0 balance( in crores) 1 Public Sector 5.33 4.51 9.84 9.12 Rs. 817463.04 6.55 2 Regional 1.84 0.32 2.17 1.49 Rs. 159948.08 1.59 Rural 3 Private Sector 0.32 0.20 0.52 0.45 Rs. 72551.50 0.30 Total 7.50 5.05 12.54 11.07 Rs. 1049962.62 8.44 Source: www.pmjdy.gov.in In the second phase, 15 th August, 2015 to 14 th August, 2016, insurance cover was provided and payment of pension under the ‘Swavalamban’ scheme through business correspondents (BCs)was also done.The total number of accounts opened in the second phase is shown in the following table: Table 2 Number of accounts opened under PMJDY during PHASE-II Sl Types of No. Of accounts opened No. Of RuPay Balance in No. Of No. Banks (in crores) Debit cards( in accounts(in accounts Rural Urban Total crores) crores) with 0 balance( in crores) 1 Public Sector 9.22 7.30 16.53 14.08 Rs. 26094.05 29.41 2 Regional 3.199 .53 3.72 2.67 Rs. 5756.44 24.50 Rural 3 Private Sector .45 .30 .75 .71 Rs. 1224.40 38.87 Total 12.87 8.13 21.00 17.46 Rs. 33074.89 28.88 Source: www.pmjdy.gov.in This scheme is implemented with the help of the following six pillars: 5.1.1 Universal access to banking facilities: The six lakhs villages across the entire countrywas mapped into Sub Service Area(SSAs) catering to 1000-1500 households in a manner that every habitation had access to banking services within a reasonable distance of about 5 km by 14 th August, 2015. Coverage of parts of J&K, Himachal Pradesh, Uttarakhand, North East and the Left Wing Extremism affected districts 3 Volume 8, Issue 9, 2020 http://aegaeum.com/ Page No: 1363 AEGAEUM JOURNAL ISSN NO: 0776-3808 which had telecom connectivity and infrastructure constraints were moved over to the Phase II of the program (15 th August, 2015 to 15 th August, 2016).