PMJDY is the Indian government's financial inclusion initiative launched in 2014 to expand banking services to unbanked populations. The summary discusses: 1) Despite past efforts, financial inclusion figures in India remained low, with only 59% of households having bank accounts. 2) PMJDY aims to provide universal access to banking facilities, debit cards, accident insurance and life insurance to every household. 3) Challenges to the success and viability of PMJDY include a large number of zero-balance accounts, high transaction costs for banks, and the need for financial literacy and technology improvements.

1. PMJDY-A FINANCIAL INCLUSION
INITIATIVE –AN ANALYSIS
Dr. Renu Lamba, UIAMS, PU,
Chandigarh

2. Introduction
Inspite of Government and RBI efforts since
independence, like many initiatives for
financial inclusion- Bank Nationalization,
Regional Rural banks, cooperative banks,
Banking correspondence agent, Swabhiman,
Swavlamban, Microfinance, No-frills account,
25% rural branch rule, Bharatiya Mahila Bank
and so on,
But our Financial Inclusion figures are not
very encoraging.

3. Some Statistics
• Only 59%Of Indian households have bank accounts (Census 2011)
• 50%Of the bank accounts are not operated at all. These accounts were
opened as a part of MNREGA and other campaigns
• 46,000Villages have bank branches. (total villages are above 6 lakhs.)
• 3.3 lakhVillages have Banking Correspondent Agents (BCA) . But this
model is epicfail.
• 34%is the average loan interest charged by local money lenders.
• 55%Of Rural Dalit families have to borrow money from local
moneylenders / Shroffs.
• 24% Is the average loan-interest rate charged by Private microfinance
institutions (MFIs) and by 2010, Microfinance agents even started
‘goondagiri’ to recover loan money, and this model began to decline.

4. SNAP SHOT OF PMJDY

5. PMJDY
• PMJDY is a National Mission on Financial
Inclusion encompassing an integrated
approach to bring about comprehensive
financial inclusion of all the households in the
country. The plan envisages universal access
to banking facilities with at least one basic
banking account for every household, financial
literacy, access to credit, insurance and
pension facility.

6. The Plan envisages
• Giving RuPay Debit card having inbuilt accident insurance cover of र 1 lakh
to all beneficiaries
• Channelling all Government benefits (from Centre / State / Local Body) to
the beneficiaries accounts and pushing the Direct Benefits Transfer (DBT)
scheme of the Union Government.
• The technological issues like poor connectivity, on-line transactions will be
addressed. Mobile transactions through telecom operators and their
established centres as Cash Out Points are also planned to be used for
Financial Inclusion under the Scheme.
• Also an effort is being made to reach out to the youth of this country to
participate in this Mission Mode Programme

7. Benefits of PMJDY Scheme
• Interest on deposit.
• Accidental insurance cover of Rs.1.00 lac
• No minimum balance required.
• Life insurance cover of Rs.30,000/-
• Easy Transfer of money across India
• Beneficiaries of Government Schemes will get Direct Benefit
Transfer in these accounts.
• After satisfactory operation of the account for 6 months, an overdraft
facility will be permitted
• Access to Pension, insurance products.
• Accidental Insurance Cover, RuPay Debit Card must be used at
least once in 45 days.
• Overdraft facility upto Rs.5000/- is available in only one account per
household, preferably lady of the household

8. TOUCHING LIVES
Smt. Nabisha Begam works as a maid servant. Her Husband
is a contract labour and she has two school going children.
Her earnings were wasted due to unwanted spending habits
in her family before opening a bank account. The PMJDY
Account is her First Bank Account opened through Financial
Literacy Camp conducted in that area by IDBI Bank. After
opening of PMJDY account, she has improved her banking
habits by making regular transactions and savings. She is
now a part time Flower seller too in that same area because
of the amount saved through this bank account. Her family is
much benefited by this account as she has increased her
earnings in dual way- working as servant maid in forenoon
and as a flower seller in evening. She has also planned to
increase her business by availing OD facility through this
account.

9. Pradhan Mantri Jan - Dhan Yojana (Accounts Opened as on 23.09.2015)
S.N
o
No Of Accounts No Of
Rupay
Debit
Cards
Bal. In
Acc
(In Rs.
Cr.)
% of
Zero
Bal
Acc
Rural Urban Total
1 Public Sector
Bank
7.96 6.49 14.45 13.00 19129.12 41.18
2 Regional
Rural Bank
2.83 0.48 3.31 2.39 4132.97 41.99
3 Private
Banks
0.43 0.29 0.71 0.63 1100.86 42.25
Total 11.21 7.26 18.47 16.02 24362.95 41.31
Disclaimer: Information is based upon the data as submitted by different banks/SLBCs

11. Some analysis …1
“Financial inclusion isn’t yet viable for banks,”
says C V R Rajendran, former chairman and
managing director of Andhra Bank. There is no
sufficient balance and 45.76 per cent of the
Jan Dhan accounts have zero balance. Jan
Dhan Yojana, primarily driven by public sector
banks, led to the opening of 137.2 million
accounts, as of August 12 this year.

12. Some analysis …2
Transaction costs prevent banks from making this scheme
profitable. To open an account with a RuPay card,
banks have to spend about Rs 100. For insurance benefits,
the accounts have to be operated once in 45 days. If these
transactions are at a bank branch, it costs Rs 45 a
transaction. To be eligible for insurance, if a customer visits
a branch at least eight times a year, it costs the bank about
Rs 400 a customer. If these accounts are to become viable,
they must have an average of Rs 6,000 and a shift to
cheaper delivery channels is needed. When a customer
uses an ATM, the cost per transaction falls to Rs 9 and, in
case of internet or mobile transactions, less than a rupee.

13. Contd..
• Financial inclusion can bring enough money to propel the already-
burdened public sector banks. Datas tell us that about Rs 16 lakh crore is
lying as cash in circulation. Presuming at least 30-40 per cent is with the
unbanked, it is big money if it enters the banking system
• Para-banking/chit funds, which are good at design and delivery of
products, adding a few of these alone have mobilised about Rs 100,000
crore of deposits. Banks can replicate these models and this will improve
their Casa (current account and savings account) and viability
• The major cost component is cash management and there is need to push
a less-cash economy. The country can save about Rs 10,000 crore by way
of direct benefits transfer, lost taxes and cost of printing. This could be
invested in building huge acceptance infrastructure
• Banks also need to cut expenses and focus on innovation

14. Recomendations
• Product and service design represent the first mile, while
the distribution network represents the last mile, which has
seen some progress. But….
• Bank could also do well(profit) if they de-centralise and act
local, Big ideas are good for institutional structures, but not
great for products. We need localisation of product
• We need to restructure products to ensure processing
expenses are reduced. This can be achieved by making the
process repetitive, standardised and aggregated. Banks
need to re-engineer processes that need customer touch-
points, as well as those that are at the back office

15. Recomendation
• Post offices currently offer few financial services. But these can be
augmented. The research shows that households have the best
access to post offices, measured in distance. On average,
households are 2 km from the nearest post office, while the distance
to the nearest ATM is three times as much. The nearest
microfinance institution (MFI) is more than 15 times the distance.
Financial inclusion strategies should leverage the already existing
and extensive postal network, especially since the original mandate
of the postal department has weakened.
• Financial inclusion as a business model rather than a service to the
unbanked, needs to evolve as a policy priority
• Strategize the provision of bank credit so as to cover the poor, by
exploiting the existing network of rural branches, cooperatives,
NGOs, MFIs, BCOs, etc., in turn leading to a greater reach in
including the financially excluded population

16. Recomendation
• Procedural/documentation changes to make
banking very simple, so that the client is not
afraid/ hesitant of going to banks
• Proactive role of government in non-financial
intermediation
• Effective use of ICT in a culturally and
geographically diverse country like India
needs no emphasis
• Adequate publicity for the project of financial
inclusion

17. Challenges to Financial Inclusion
Various studies have identified the following challenges:
• Lack of usage of bank accounts
• Financial Literacy
• Handling of Large number of accounts
• Manpower Training
• Security
• Malpractices
• Lack of Trust
• Low Banking Penetration in Rural Areas
• Low Credit provided to people of rural areas –As of March 2014, only 8.4 per cent of the total credit
was provided to people living in rural areas whereas metropolitan areas accounted more than half
of the total credit distributed. This disparity arises due to the fact that banks are unsure about
repayment from rural areas. Many times banks have to write off the loans due to political pressure.
Seasonal vagaries like bad monsoons negatively impact the ability of farmers to repay their loans
• Use of Technology – There is low telecom penetration in rural areas. Also, the debit card
penetration is low in rural areas. Although, government is providing RuPay cards, their usage has
not picked up. Moreover, increasing expenditure on IT and risk on security with respect to data
theft is also a major concern

18. Conclusion
One of the greatest steps ever taken to
eradicate poverty is financial inclusion through
PMJDY. For the success of any scheme
constant review and regular check is very
much essential. Successful implementation
would not only reduce poverty but also puts a
check on corruption. A bold first step by NDA
Government indeed helped many to come
into the main stream of economy and reduce
financial untouchability.

19. References
• “Report of The Committee on Financial Inclusion”, NABARD 2008.
Available at:
https://www.nabard.org/English/report_comfinancial.aspx.
Website last visited on 17th June’16.
• “CRISIL Inclusix: An index to measure India’s progress on financial
inclusion”, CRISIL (June, 2015). Available at:
http://www.crisil.com/pdf/corporate/CRISIL-Inclusix-Volume-III.pdf.
Website Last visited on 17th June’16
• “MUDRA – Micro Units Development & Refinance Agency Ltd.”.
Available at: http://www.mudra.org.in/ Website last visited on:
29th June ‘16.
• http://www.business-standard.com/article/finance/can-banks-see-
profit-in-financial-inclusion-115082501002_1.html 5 Sept 2016