The Jan Dhan Yojana scheme aims to promote financial inclusion across India by providing all households access to basic banking services. Key aspects of the scheme include opening zero-balance bank accounts for households that can be operated with a RuPay debit card and eligible for overdraft facilities. The scheme also provides accident insurance of Rs. 1 lakh and seeks to enable direct transfer of government benefits. While over 115 million accounts have been opened achieving the target, many remain dormant with low balances and transaction levels, questioning the financial viability of serving these accounts. Improving last mile banking connectivity and increasing usage of accounts over time will determine if the scheme truly enables widespread financial inclusion.

1. JAN-DHAN YOJANA
Rishabh Rathi
Nouh Mushtaque

2. What is Jan Dhan Yojana?
Jan-Dhan Yojana is National Mission for
Financial Inclusion to ensure access to financial
services, namely, Banking/ Savings & Deposit
Accounts, Remittance, Credit, Insurance,
Pension in an affordable manner. Account can
be opened in any bank branch or Business
Correspondent outlet.
How the scheme is making difference?
1. Providing Basic Banking Accounts
with overdraft facility and RuPay Debit
card to all households: The scheme
aims to provide at least one bank
account to each household across
the country, with a target of
covering 75 million households by
26 January 2015. Under the
programme, account holders will be
given a RuPay debit card. And upon
satisfactory operation of the account
for six months, the account holder will
get a Rs 5000 overdraft facility
2. Universal access to banking facilities
This scheme have the access to various
banking facilities like mobile banking,
mobile wallet & online transactions etc.
3. Financial Literacy Programme:
Financial literacy would be an integral
part of the Mission in order to let the
beneficiaries make best use of the
financial services being made available
to them.
4. Creation of Credit Guarantee Fund:
Creation of a Credit Guarantee Fund
would be to cover the defaults in
overdraft accounts.
5. Accidental Insurance: All households
that open such bank accounts under
the Jan Dhan Yojana will get Rs 1 lakh
accident insurance. Given the
considerably high expenses when it
comes to medical emergencies, the lack
of formal credit facility through banking
channels pushes the poor deep into the
debt-traps.
6. Better Financial stability : The
country from this scheme will have a
better financial stability as when
everyone in the country will open an
account they will indirectly get
connected to economic vehicle of the
country.
7. Account holders to get
Centre/states benefits:
Under the Jan Dhan Yojana, all benefits
from the Centre/states/local bodies are
proposed to be transferred to the
accounts of beneficiaries. The
government is also likely to push the
Direct Benefits Transfer (DBT) scheme
and try to restart it for liquefied
petroleum gas.
8. To cover a vast majority of country’s
poor: The Jan Dhan Yojana aims to
cover 60 per cent of the country's
population that does not have access
to formal banking services.
9. Zero balance account: Through this
scheme, every individual living in the
country can have a Zero Balance
Account. There is no minimum balance
required for keeping the account open.
10. Pension schemes: Jan dhan yojana
provides pension n payments under
the Swavalamban Yojana scheme
for workers in the unorganised
sector will be paid through bank
accounts by August 2018.

3. What lacks in the scheme?
1. Retrieval and collection of
loans: One of the major
limitations that PM Jan Dhan
Yojana may come across is the
retrieval and collection of
loans. The borrowers are
primarily going to be low amount
borrowers and would often
come from unorganized
segments of society and
profession.
2. Losses to the banks: It
might be a little difficult for the
banks and the system to keep a
track of the borrowers and thus
they may end up in losses.
3. Repayments: if repayments
are not mechanized efficiently, it
may have a swelling loan
burden on Indian banks and
would thus impact the financial
system altogether
4. Insurance thuggary in small
fonts: Jan Dhan gives you free
accident insurance cover worth
Rs.1 lakh. But there is a secret
condition- you must use RuPay
debit card at least once every 45
days. This is not be possible for
poor families in remote tribal areas.
So, they’ll lose the benefit due to
inactivity.
5. Multiple accounts: To get
large insurance or overdraft
facility, same person might open
multiple accounts in multiple
banks- one with Aadhar card, one
with PAN card, one with voter’s
card.
6. Money laundering: JDY
accounts could be used for money
laundering and Hawala operations.
Hawala Operators can split the
whole amount (say 1 cr) into
several small units into several
JDY accounts.
7. Problem with BCA model:
They get 2% commission on each
transaction. As a result, they
quickly lose interest in this game,
being some other side jobs.
8. Lack of personnel: The
expanded financial architecture
will need personnel, which is
lacking, and could be important
supply side deficit. Banks have
been advised under the JDY to
open 200 accounts a day in each of
their existing rural branches, but
they are wary, as the existing
infrastructure in those branches
cannot handle the extra load.
9. Risk involved: Financial inclusion
cannot be achieved only by
meeting the target numbers. The
RBI Governor, Raghuram Rajan had
cautioned banks on the risks
involved in just hunting for number
with regard to Jan-Dhan Scheme,
asking them not to compromise on
core objective of the programme.
”When we roll out the scheme, we
have to make sure it does not go
off the track. The target is
universality, not just speed and
numbers.”
10. Ignores past failures: This
new scheme ignores lessons
from failures of the Congress
models. The first lesson is that
speed and mass loans will yield
blazing headlines and initial
praises for effort, but will prove
recipes for failure.

4. Is it viable or just a bubble?
1. Though the Pradhan Mantri Jan Dhan
Yojana has successfully exceeded its financial
inclusion target by opening 115 million bank
accounts, most of these are ‘zero-balance’.
According to data released by the ministry, only
28 per cent of the accounts opened under the
scheme are active, with about Rs 9,000 crore
deposited in these.
2. The Jan-Dhan initiative will slowly encourage
the habit of saving, The share of zero balance
would go down further as the government
moves towards complete transfer of subsidy
funds into bank accounts, minimising leakages.
3. The financial viability of running these
millions of accounts would depend on the
minimum balances maintained and the number
of transactions carried out in a year, out of the
180 million bank accounts opened under the
financial inclusion scheme so far, a vast majority
sat dormant or unused once they were opened.
The RBI also noted that even as the volume of
accounts had increased substantially keeping
the transactions flowing remained a challenge.
In other words, the banking inclusion system
generated empty accounts to meet set targets.
4.A more fundamental question that the
scheme has not yet resolved is the last-mile
connectivity essential for financial inclusion. The
government says it would be based on banking
correspondents, which are not brick and mortar
banks but private companies. It's cheaper than
running branches but still requiring a substantial
flow of money to and from the accounts to
generate commission for the agents involved.
5.With all the factors keeping around and just
been a year for the scheme to be launched its
difficult to analyse weather it’s a viable or just a
bubble, but with growing number of customers ,
exploring the rural areas and while controlling
other factors this scheme can turn to be
proficient one.