Eight Months on, Two Charts Raise Questions About India’s Financial Inclusion Scheme

Friday, April 10, 2015

“After ’banking the un-banked’ with the Jan Dhan Yojana, it’s time to ’fund the unfunded’,” Prime Minister Narendra Modi said at the launch of the Micro Units Development Refinance Agency, or the MUDRA Bank, on Wednesday.

Approximately 58 million small businesses in the country, which account for a mere 4% of institutional funding, despite employing over 120 million people, will be the main beneficiaries of the bank, which has been launched under the ambitious Pradhan Mantri Jan Dhan Yojana.

It is hoped that the Rs 20,000-crore corpus of the bank will come in handy for extending credit of up to Rs 10 lakh to small businesses.

The un-banked

The Jan Dhan scheme started in August as a well intentioned mission for “banking the un-banked.”

Providing free of cost bank accounts with minimal paperwork and free insurance to top it up seemed like an idea whose time had come. No wonder, the scheme soon amassed a 12.5 crore new bank accounts in less than eight months, establishing a world record.

However, to describe it as a success just yet would be an exaggeration as an alarming number of these accounts to not have any money in them. As of Tuesday, almost 8.44 crore of the 12.5 crore new bank accounts had zero balances, reflecting the perils of the haste against which the Reserve Bank of India had warned the government long ago.

Source: Scroll.in (link opens in a new window)

financial inclusion