How Jan Dhan accounts act as a barometer for India's global economic aspirations

To achieve its aim to become the third largest economy globally, India has to fire all cylinders on the economic front. And boosting financial inclusion will be a determining factor. While formal finance can boost job creation and reduce vulnerability to economic shocks, it can also support sustainable and inclusive socio-economic growth for all at a macro level, a Reserve Bank of India report on National Strategy for Financial Inclusion noted.

Among the BRICS nations, India has walked the longest distance to achieve financial inclusion in the past decade. While only 35.2 per cent of people had a bank account in 2011, it rose to 77.5 per cent in 2021. The global average in the same duration rose from 50.6 per cent to 76.2 per cent.

BRICS NATIONS COMPARISON

The Pradhan Mantri Jan Dhan Yojana (PMJDY), which was launched in August 2014, played a major role in pushing the low-income population towards opening bank accounts. The PMJDY offered various financial services like basic savings bank accounts, access to need-based credit, remittances, insurance, and pension to the unbanked weaker sections.

Jan Dhan accounts doubled from 24 crore in August 2016 to 50 crore in August 2023. And according to the Ministry of Finance, a large number of accounts are active. A PMJDY account is treated as inoperative if there are no customer-induced transactions in it for two years. According to the data, 81.2 per cent were operative in August 2022, up from 76 per cent in 2017. Only 8.2 per cent of PMJDY accounts were zero balance accounts, according to the ministry.

Average deposits in such accounts also increased from Rs 1,279 in 2015 to Rs 2,783 in 2019 and Rs 4,076 in 2023. Altogether, the Jan Dhan accounts hold a deposit of over Rs 2 lakh crore.

TOTAL ACCOUNTS & AVERAGE DEPOSITS

In terms of per thousand population, Assam, Chhattisgarh, West Bengal, Madhya Pradesh and Jharkhand have the maximum number of Jan Dhan accounts. Assam has 634 Jan Dhan accounts per thousand people compared to the national average of 360 accounts per thousand people.

MAP

While the Jan Dhan Yojana has provided momentum to financial inclusion, other factors such as better financial product design, financial literacy, and strengthening customer protection framework need adequate focus to maintain that momentum.

“The rate of accretion of new PMJDY accounts has slowed in recent years. This is an indication that the programme is nearing its intended aim of universal access to financial services,” the RBI said in a report.

But all that glitters is not gold — when it comes to the glowing Jan Dhan numbers. Fifty-six per cent of PMJDY accounts belong to women and 67 accounts have been opened in rural or semi-urban areas. However, a joint study conducted by the Bank of Baroda and Women’s World Banking underlined that many women are actively using their PMJDY accounts only to access the benefit transfers they receive from government initiatives, which means that they are simply cashing out their benefits.

“They are not using their PMJDY accounts to deepen their financial engagement, such as to save, build account and credit histories, or to access other financial products such as microinsurance, pensions, or micro-loans,” the report said.

The study revealed that rural women have few sources of income that they can call their own. Also, they do not participate in household financial decision-making and do not have a say in the utilisation of direct benefit transfers in their Jan Dhan accounts. Thus, they do not see value in banking services. Adding to it, many women believe that their savings are not worth depositing in a formal account. But hopefully, finding a toehold in the financial world via Jan Dhan accounts may make such women more confident about handling their money and improve their financial inclusiveness further.