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Jan Dhan Yojna - Universal Banking for Every Household

Posted in Finance Articles, Total Reads: 1780 , Published on February 16, 2015

“Pradhan Mantri Jan Dhan Yojna” is ambitious scheme with aim to link every household in the country to universal banking facilities free of cost.


Its sole purpose is to bring financial inclusion to country like other major economies (US, China etc.) of the world. But along with bringing financial literacy in rural population, it will also help in to availing the various government schemes and access to the financial services, like bank account with RuPay Debit card, access to credit, remittance, Insurance & Pension. There are around 5,00,000 villages in India but only 32,000 - 35,000 villages have a bank which is just 5% and it should be increased by at least 15-20%. The mission brings the excluded sections into the financial mainstream as well as makes the transfer of benefits of various subsidy schemes of the government effectively. Objective was set to open 100mn bank accounts with deadline of 26th Jan 2015. Also A minor of above the age of 10 years can open Savings Bank account.


• No minimum balance required and RuPay debit card will be issued to each beneficiary

• Accidental insurance cover of Rs.1,00,000/-

• Life insurance cover of Rs 30,000/-

• Beneficiaries of Government Schemes will get Direct Benefit Transfer in these accounts

• After satisfactory operation of the account for 6 months, an overdraft facility of Rs 5000/- will be permitted

• Access to Pension, insurance products

• Mobile banking for poor will be made available through National Unified USSD platform with introduction of new technology introduced by NPCI for which no requirement of smart phone to avail the facility

Withdrawal limit is set at Rs 10000/month and maximum deposit amount will be less than Rs.1,00,000/- Overdraft facility can be availed by only single account per household not everyone in the family.

Current Performance and statistics:

As of 31st Dec 2014 there are total 10.36 crore accounts are opened under this scheme including private sector and regional rural banks. Dairy farmers were also encouraged to get associated with this scheme as they constitute a big basket of potential account holders, many of whom could be outside the banking fold. There are 15.64 million dairy farmers registered with various cooperatives in the country.

Rural Urban Total

Public Sector Bank 447.99 376.84 824.83

Private Sector Bank 155.6 27.66 183.26

Regional Rural Bank 14.69 13.43 28.12

Total 618.28 417.93 1036.21

Out of above 10.35 crore accounts only 838.76 lacs accounts received RuPay debit card. Total amount deposited in bank of all the accounts is 804428.66 lacs yet total number of accounts with Zero balance are 759.70 lacs which more than 70% of the total accounts which will be very critical issue in near future if these accounts continues to remain dormant.

Private sector and regional rural bank opened only 18-22% of total accounts due to risk involved in the process. It also permits to open Minor account if his/her age above ten years.

In Uttar Pradesh though total population is 200+ million only 1.7 million accounts were opened and there are such geographically challenged areas where it is difficult for bank to set up their branch hence government has come up with a solution for this issue through Bank Mitra or Business Correspondent (BC) which will help banks to extend their reach to rural areas as well.

BC Agents are retail agents engaged by banks for providing banking services at locations where opening of a brick and mortar branch / ATM is not viable. Fixed point Bank Mitra in each Sub Service Area (SSA) comprising of 1000-1500 households (3 to 4 villages on an average) to visit other villages in the SSA on fixed day and collect deposit, remittance and solve any banking related queries which will reduce pressure on bank branch.

Loopholes in the scheme:

• Though mobile banking facility is made available, there is always question mark on the ability of farmer to operate mobile

• Due to geographical location many state are not covered under the scheme

• To achieve target bank employees have picked anyone blindly to open account without checking any documents which exposes bank to high-risk customer account

• There are large numbers of dormant accounts present in the bank system for which they have to incur additional cost of account maintenance

• Due to withdrawal and deposit limit banks will have complex process to find out total amount available with them for giving loans

• Huge number of duplicate accounts were created which will add to dormant account with bad user experience as there is lot of confusion in bankers as who should open account

• Overdraft facility after satisfactory performance may back fire and expose bank to high risk if credit worthiness of a customer is questionable along with that what is satisfactory performance of account is not clear

• Though the scheme is started with giving benefits to citizens its implementation has created many problems due to which many people are reluctant to open account under the scheme

• There are not enough RuPay cards, which should be issued to beneficiaries and only 25-30% of beneficiaries are provided with it

• There are only 3.12 crore accounts opened as on December 17 are linked to AADHAR card number hence it will create problem while linking DBT to the JDY account

• Helpdesks were unable to resolve queries due to lack of knowledge about scheme

• If no documents are available “Chhota Khata” is opened but for this there should be certain timeline in which beneficiary has to produce valid documents.

Suggested improvement in the scheme:

• Main objective of the scheme was to provide banking to everyone but large majority of the BPL population is not having accounts hence in phase-I only these people should be allowed open account

• Another objective access to credit has to be given importance because still in 256 districts of India there are 95% of adults not having any bank loan

• Overdraft facility should be given to BPL only and families above certain annual income should not be allowed to use this

• If person already has account then instead of opening new account existing account category should be changed

• Clarification on common customer complaint should be addressed through advertisement on TV & through newspaper

• Pressure to open accounts on front desk bank employees should be reduced and more focus is given on opening account of eligible customer

If mentioned loopholes are plugged then it will help to bring the money on formal channel. Dependence of Farmer and poor people on money lender will reduce and access to credit will be easily available to them.

After financial literacy use of hard cash will be minimized and people will thoughtfully put their money at right place. If AADHAR no. is linked to account through DBT there will reduction in no of dormant accounts. E-KYC will help to abide by RBI rule for banks and avoid penalty which majority of banks faced last year. As only banks having CBS are allowed to participate in the scheme more banks will implement this system in their operations. "

This article has been authored by Swapnil Shirsat from JBIMS, Mumbai

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