PMJDY-National Mission for Financial Inclusion (GS-3, Economics, Financial Inclusion)

28 Aug PMJDY-National Mission for Financial Inclusion (GS-3, Economics, Financial Inclusion)

Context:- “The journey of PMJDY led interventions undertaken over a short span of 7 years has in effect, produced both transformational as well as directional change thereby making the emerging FI ecosystem capable of delivering financial services to the last person of the society-the poorest of the poor.“Financial Inclusion is among top-most priorities of the Government as it is an enabler for inclusive growth.

• PMJDY was announced by Prime Minister, Shri Narendra Modi in his Independence Day address on 15th August 2014.

• The Ministry of Finance is committed to provide financial inclusiveness and support to the marginalized and hitherto socio-economically neglected classes. 
• Financial Inclusion is a national priority of the Government as it is an enabler for inclusive growth. 
• It is important as it provides an avenue to the poor for bringing their savings into the formal financial system, an avenue to remit money to their families in villages besides taking them out of the clutches of the usurious money lenders. 
• A key initiative towards this commitment is the Pradhan Mantri Jan Dhan Yojna (PMJDY), which is one of the biggest financial inclusion initiatives in the world.

Background about Pradhan Mantri Jan-Dhan Yojana (PMJDY):-

• • It 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. 

• Objectives of PMJDY:

• • Ensure access of financial products & services at an affordable cost Use of technology to lower cost & widen reach 
  • Basic tenets of the scheme Banking the unbanked – Opening of basic savings bank deposit (BSBD) account with minimal paperwork, relaxed KYC, e-KYC, account opening in camp mode, zero balance & zero charges Securing the unsecured – Issuance of Indigenous Debit cards for cash withdrawals & payments at merchant locations, with free accident insurance coverage of Rs. 2 lakh Funding the unfunded – Other financial products like micro-insurance, overdraft for consumption, micro-pension & micro-credit 

  • 6 pillars on PMJDY:–

    • Universal access to banking services – Branch and BC 
    • Basic savings bank accounts with overdraft facility of Rs. 10,000/- to every eligible adult.
    • Financial Literacy Program– Promoting savings, use of ATMs, getting ready for credit, availing insurance and pensions, using basic mobile phones for banking.
    • Creation of Credit Guarantee Fund – To provide banks some guarantee against defaults Insurance – Accident cover up to Rs. 1,00,000 and life cover of Rs. 30,000 on account opened between 15 Aug 2014 to 31 January 2015 

• Pension scheme for Unorganized sector

  • Accounts opened are online accounts in core banking system of banks, in place of earlier method of offline accounts opening with technology lock-in with the vendor 
  • Inter-operability through RuPay debit card or Aadhaar enabled Payment System (AePS) 
  • Fixed-point Business Correspondents Simplified KYC / e-KYC in place of cumbersome KYC formalities.

• Extension of PMJDY with New features – 

  • Focus shift from ‘Every Household’ to Every Unbanked Adult’ 
  • RuPay Card Insurance – Free accidental insurance cover on RuPay cards increased from Rs. 1 lakh to Rs. 2 lakh for PMJDY accounts opened after 28.8.2018. 
  • Enhancement in overdraft facilities – OD limit doubled from Rs 5,000/- to Rs 10,000/-; OD upto Rs 2,000/- (without conditions). Increase in upper age limit for OD from 60 to 65 years

Impact of PMJDY:-

• PMJDY has been the foundation stone for people-centric economic initiatives. Whether it is direct benefit transfers, COVID-19 financial assistance, PM-KISAN, increased wages under MGNREGA, life and health insurance cover, the first step of all these initiatives is to provide every adult with a bank account, which PMJDY has nearly completed. 
• One in 2 accounts opened between Mar’14 to Mar’20 was a PMJDY account. Within 10 days of nationwide lockdown more than about 20 crore women PMJDY accounts were credited with exgratia. 
• Jandhan provides an avenue to the poor for bringing their savings into the formal financial system, an avenue to remit money to their families in villages besides taking them out of the clutches of the usurious money lenders. 
• PMJDY has brought the unbanked into the banking system, expanded the financial architecture of India and brought financial inclusion to almost every adult. 
• In today’s COVID-19 times, we have witnessed the remarkable swiftness and seamlessness with which Direct Benefit Transfer (DBTs) have empowered and provided financial security to the vulnerable sections of society. 
• An important aspect is that DBTs via PM Jan Dhan accounts have ensured every rupee reaches its intended beneficiary and preventing systemic leakage.

Achievements under PMJDY

• PMJDY Accounts: 43.04 Crore; 55.47% (23.87 crore) Jan-Dhan account holders are women and 66.69% (28.70 crore) Jan Dhan accounts are in rural and semi-urban areas
• During first year of scheme 17.90 crore PMJDY accounts were opened Continuous increase in no of accounts under PMJDY
•  PMJDY Accounts have grown three-fold from 14.72 Crore in Mar’15 to 43.04 Crore as on 18-08-2021. Undoubtedly a remarkable journey for the Financial Inclusion Program.

Swarn Singh

Plutus IAS Current Affair Team Member