NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Thursday, November 13, 2014

Initial indications from the data on Prime Minister’s Jan Dhan Yojana (PMJDY) are that the grand financial inclusion scheme of the Narendra Modi government has failed to achieve its original objective – to encourage the country’s vast unbanked poor population to use bank accounts for cash transactions.

According to the data available with the PMJDY website, banks have opened 7.25 crore accounts with a balance of Rs 5,611.2 crore. Of these, about 5.48 crore accounts, or 75 percent, have zero balance, the data showed. What this also means is that many of these account holders are not going to get the promised insurance cover and ovedraft facility.

The scheme was launched on 28 August with much fanfare by Prime Minister Narendra Modi. It is aimed at bringing the unbanked poor under the formal banking fold. In order to encourage account opening, banks were told to bundle incentives like insurance and overdraft facility. As per the rules, to avail of these facilities, beneficiaries should have transacted from the account at least once in a month.