Bottom Of Pyramid Leg Up  Jan Dhan Yojana Completes 10 years With 54 Crore Accounts

 It is the 10^th anniversary of the Pradhan Mantri Jan Dhan Yojana (PMJDY), programme. It was announced by the prime minister from the ramparts of Red Fort on 15^th August 2014. As a scheme for financial inclusion and gradual financial literacy amongst people who were not allowed to own bank accounts before its advent, it is nothing short of revolutionary. It is designed to impart dignity to, and  empower the unbanked poor. It has, in practice, particularly led to the enthusiastic use of grass-roots women entrepreneurs. They have taken to the formal banking system in a big way. Because of their sense of financial responsibility/discipline, in their borrowing and payback habits,  they have been one of its biggest beneficiaries.

One could open a Jan Dhan Account, if necessary, with zero balance, no questions asked. All the public sector unit (PSU) banks participated in mission mode, responding to the call from the prime minister. Lakhs of accounts were opened in a single day under the programme when it was first introduced.

Once the bank accounts were open, they offered overdrafts and loans in due course to people with no collateral or references beyond their own track record.

After a decade of operations, there are 53.13 crore accounts, with Rs. 2,31,000 crores deposited in them. Some 55.6% of them are owned by women who did not need a father, a brother, a husband or a reference to open one. The average balance in these accounts is now Rs. 4,300 odd. Two-thirds of all the accounts are in rural and semi-urban areas according to the Ministry of Finance.

The overall financial inclusion rate, defined by owning and using a proper bank account, has gone up from 25% of the adult population in 2008, to 80% today. This achievement in just a decade is considered phenomenal, given that the adult population today is more than a billion people.

These plain savings accounts have been used, over the decade, for direct benefit transfers from the government without leakages caused by the middlemen of the past. They were used to distribute financial assistance during Covid. They are used for subsidies given under the PM-KISAN programme, for disbursing wages under MGNREGA. They are used in providing life and health insurance covers free of charge by the government.

The processes used are vastly aided by the government induced digital revolution of the last few years, RU Pay debit cards, some 36 crores of them were issued to these account holders. UPI transactions have shot through the roof, with over Rs. 13,000 crores in transactions. The ubiquitous Aadhar Card for identity verification is linked to the widespread use of mobile phones.

A number of other government programmes, such as MUDRA loans for the MSME Sector use the Jan Dhan accounts as the basis for transactions.

Prime Minister Narendra Modi points out that the Congress’ Indira Gandhi led government nationalised many banks, in the name of socialism, and ostensibly to help the poor, but the target audience remained unbanked for decades yet.

This NDA government, and the prime minister, are well-aware that some 80% of all employment in India is in the informal sector, with low wages, and inadequate benefits. However, there is a great aspiration to join the formal employment sector. The government is therefore laying great and fresh emphasis on apprenticeship and skilling, with an outlay of over Rs. 2 trillion in the recent union budget of July 2024. The money will provide internship funds and other incentives to both prospective employers and aspirants to formal sector jobs. These new initiatives, again in tandem with the Jan Dhan Yojana, are yeoman efforts to address the needs of those at the bottom of the pyramid.

The fact that the Jan Dhan Yojana is such a roaring success is admired and studied by other governments in various parts of the world. The out-of-the-box thinking and digitisation revolution that has made its success possible is enabling India to catch up to the developed West in many other ways too. The sheer numbers of people involved would make any manual process take decades, but implementing it via a biometric enabled identity card like Aadhar was the key.

That too was an early revolution under the Modi regime, leveraging India’s prowess  in IT led by the current Infosys Non-Executive Chairman Nandan Nilekani. It should not be overlooked that Nilekani has just coined a new term ‘Fininternet’, meaning a marriage of  real-time financial information from multiple sources and parameters, and the world-wide web. Why? For better informed decision-making, of course. How many Jan Dhan Yojana sophisticates, once the ignored, will use it when it comes?

(771 words)

August 29^th, 2024

For: Firstpost, News18.com

Gautam Mukherjee