Tag: PMJDY

How Financial Inclusion is playing a vital role in the Banking Sector

Banking & Finance

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55% of Jan Dhan account holders are women, and 67% are in rural and semi-urban areas. (File image)

by Manoranjan ‘Mao’ Mohpatra

Recently, we celebrated the 7th anniversary of Pradhan Mantri Jan Dhan Yojana (PMJDY). Ever since its launch in 2014, Jan Dhan has been the biggest driver of financial inclusion and one of the largest financial inclusion schemes globally.

Well, that’s true. It’s because more than 430 million bank accounts have been opened under this scheme since inception, amounting to INR 1.46 trillion. Out of which, 370 million that is 86%, are currently operative. In the last seven years, Jan Dhan has financially included the segments like women and the rural population into the formal banking system, thereby empowering them financially to hold a bank account. In fact, today, 55% of Jan Dhan account holders are women, and 67% are in rural and semi-urban areas. Moreover, a total of 312.3 million RuPay cards have been issued to PMJDY account holders.

Hence, the figures mentioned above clearly attest that a significant shift towards financial inclusion is in progress in India.

However, before delving deep into the initiatives leading to financial inclusion in the country, it’s essential to understand what it means.

Financial inclusion is about delivering banking services to all sections of society. Primarily, it’s enabling to reduce the economic gap between the rich and the poor with an aim to lead economic progression in the country.

Initiatives towards financial inclusion

Among several initiatives driving financial inclusion, JAM trinity (linking Jan Dhan accounts with Aadhaar and mobile numbers) is one of them as it’s creating a holistic financial inclusion ecosystem. JAM trinity is serving as an important medium in strengthening financial delivery mechanisms and social welfare schemes and also enhancing the efficacy of several Direct Benefit Transfer (DBT) Programmes.

For instance, to avail schemes like PM-KISAN or life and death insurance, the first step requires people to have a bank account – and that’s what PMJDY provides.

In addition, Aadhaar helps identify and register beneficiaries, and mobile numbers allow communication with them via SMS.

At the same time, during the pandemic-induced lockdown, JAM played a game-changing role as it helped reach out to the citizens staying in the farthest corners of the country. It is because of JAM a total of INR 309.45 billion were credited to women PMJDY account holders during Covid-19 lockdown.

Clearly, Jan Dhan, as the first step towards financial inclusion, followed by banking services like debit cards, insurance, pension scheme, etc., is bringing the financially excluded segment into the formal banking system. Today, the number of individuals visiting banks and ATMs has considerably increased in rural and urban areas.

In addition, Aadhaar Enabled Payment System (AePS) is another service to facilitate financial inclusion in India. It helps in withdrawing money (financial aid received) at micro-ATMs using Aadhaar number and fingerprint. Providing authentication of customers, availability of services, accessibility through AePS channel, and affordability as it’s free of cost, AePS is undoubtedly playing a crucial role in the journey of financial inclusion. In fact, the National Payments Corporation of India (NPCI) highlights that the value of transactions through AePS has nearly doubled to approx. INR 219.78 billion in January 2021 from INR 112.87 billion in January last year.

Role of digital payments in financial inclusion

For several SMEs, digital payment services like Paytm, PhonePe, and Google Pay are becoming the first formal banking service. Even a small roadside kiosk now accepts payment digitally using a QR Code. According to a recent survey done by a merchant payment solutions company, India is estimated to experience the fastest growth in the transactions of mobile payments in terms of value, with a CAGR of over 20% between 2019 and 2023.

Alongside, PM SVANidhi scheme is providing an incentive or cashback facility to street vendors for adopting digital transactions. The network of lending institutions and the digital payment aggregators such as Paytm, NPCI (for BHIM), Google Pay, Amazon Pay etc., will help to onboard the vendors for digital transactions. The onboarded vendors will receive incentives in the form of a monthly cashback in the range of Rs.50 to Rs.100.

Conclusion

Even banks are driving the initiative of financial inclusion by shifting towards digital banking. Those living in remote areas and women are now better equipped with banking facilities via an online system. The traditional financial institutions are leaving no stone unturned in moving their operations online, thereby thus allowing financial inclusion to widen its scope.

All in all, the vision is to bring more and more people – especially those who are underserved customers – into the formal financial ecosystem.


(The author is chief executive officer at Comviva. Views expressed are personal and not necessarily that of Financial Express Online.)

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PMJDY adds 1.3 crore beneficiaries in H1 of FY22

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Interest in the Pradhan Mantri Jan Dhan Yojana (the world’s largest financial inclusion scheme, continues unabated with 1.30 crore new beneficiaries getting added in the first half of the financial year 2021-22.

The total number of beneficiaries has gone up to 43.50 crore at the end of September 2021 while it was at 42.20 crore on April 1, 2021. The total balance in the basic savings bank accounts opened under the scheme, however, almost remained flat at ₹1,45,272 crore (as on September 29, 2021), as per the government data.

The continued growth in the number of accounts is driven by strong efforts by the banks as well as increasing interest among the low-income groups in seeing the scheme as a ‘passport’ to government schemes, according to bankers.

“In actual terms, the number would have been much higher but the first quarter of the current fiscal had seen the massive impact of the second pandemic wave, resulting in scaling down of operations and deployment of staff on a staggered basis by the public sector banks,” said a senior official of SBI, adding that “utmost priority” is being given to the scheme.

Interestingly, the first half of the last financial year (FY2020-21) was better for the flagship financial inclusion drive of the Centre.

Despite the first wave of the pandemic and the national lockdown from the end of March 2020, there was a massive addition of 2.83 crore new beneficiaries between April 1 and September 30, 2020, with the total number of beneficiaries increasing from 38.07 crore to 40.90 crore. “The rollout of some of the benefits of Pradhan Mantri Garib Kalyan Yojana as Covid relief to Jan Dhan accounts holders had led to a greater rush in opening new accounts last year. If we exclude that impact, the surge in new numbers in the first half of current fiscal year is impressive, thanks to efforts of the public sector banks,” said an economist with a leading private bank, adding that the private sector banks are placing the scheme on the back burner.

Enabler

The expansion of the financial inclusion scheme in the country is still on. As on November 10, 2021, the total beneficiaries stood at 43.85 crore even as the total balance in the accounts edged up to ₹1,48,069 crore. Thus, the scheme has come a long way since its launch in 2014 offering a host of benefits to the beneficiaries. PMJDY has now become an effective enabler for the digitisation of financial transactions apart from being a tool to bring the unbanked into the ambit of the formal banking system.

This has been ably supported by initiatives to ensure last-mile delivery of banking services through innovative banking channels like the ‘BC model’. Thanks to technology, there has been a massive improvement in the deepening of digital financial services, more so after the demonetisation of 2016.

The Jan Dhan, Aadhaar and Mobile (JAM) ecosystem has made a significant difference in the universe of financial inclusion. PMJDY formed the bedrock of Reserve Bank’s pilot project, launched in 2019, in association with banks of making at least one district in each State/UT 100 per cent digitally enabled. This project covered 42 districts and was aimed at facilitating greater access and usage of digital payments by the common man.

The State Level Bankers’ Committees (SLBCs) have been advised by RBI to give renewed focus and emphasis to ensure sustenance of the digital progress in these identified districts. Further, to promote ‘universal access to financial services’ under the National Strategy for Financial Inclusion (NSFI), access to some form of banking outlet has been provided to 99.9 per cent of the targeted villages within a 5 km radius/ hamlets with 500 households in hilly areas. All these efforts are being supported to a larger extent by the Jan Dhan scheme. According to RBI data, as of March 2021, banks have achieved a digital coverage of 95.9 per cent of individuals while the achievement for businesses stood at 89.8 per cent.

Road ahead

The achievements of PMJDY have been duly recognised by many. While there is much to cheer over the progress made so far, it is pertinent that the scheme needs to be scaled up on a priority basis. The government in particular and banks, in general, must continue their efforts for greater financial inclusion in pursuance of the goal of a sustainable future for all. There is a need to speed up the issue of RuPay cards to Jan Dhan account holders.

Almost 28 percent of PMJDY beneficiaries are yet to be issued RuPay Cards. Out of 43.85 crore beneficiaries (as on November 10, 2021), 31.72 crore have been issued the cards.

As observed by the RBI governor Shaktikanta Das recently, there is a need for an accelerated universal reach of bank accounts along with access to financial products relating to credit, investment, insurance and pension.

It is the responsibility of all the stakeholders to ensure that the financial ecosystem (including the digital medium) is inclusive and capable of effectively addressing the risks like mis-selling, cyber security, data privacy and promoting trust in the financial system through appropriate financial education and awareness. These efforts have to be supported by a robust grievance redressal mechanism, according to Das.

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BOI conducts ‘customer outreach programme’ in Delhi, BFSI News, ET BFSI

Banking & Finance

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New Delhi [India], November 13 (ANI): With an aim to take mainstream banking services to the people, the Bank of India has been conducting “Customer Outreach Programme”through its branches across the country to include more and more people in the mainstream banking and offer them banking services of their choice.

One first such programme was conducted at Srinagar on October 6, 2021.

According to the official release, BOI conducted another ‘Customer Outreach Programme” at its National Banking Group, New Delhi on November 11 with an attendance of over 100 customers including new and existing customers from all the branches across the New Delhi Zone.

The programme was inaugurated by Managing Director and CEO Atanu Kumar Das by opening New 116 BCs outlets at various locations in Ladakh, Delhi, Punjab and Rajasthan.

Speaking on the occasion, Das highlighted various initiatives taken by the bank under RAM (Retail, Agri and MSME) in recent times for the benefit of its customers.

He informed that the bank has recently slashed ROI for home loans and vehicle loans and has posted a net profit of 1,050.98 crores for the quarter of September 2021 marking a rise of 99.89 per cent.

He said, “BOI is committed fully to the economic revival process.”

He further added that BOI is at the forefront of successfully implementing all the government-sponsored schemes viz. MSME, Mudra, Stand-up, Start-up, PM SVANidhi schemes.

Bank has achieved 33 per cent PMSBY enrolments in PMJDY against DFS Targets 30 per cent for Q2FY21-22 and has won the “APY Annual Award (2020-21)” for overall performance for achieving ‘per APY’ target. The bank is implementing an E-PLATFORM solution for Straight through the process of major Banking products.

Das also distributed sanction letters to the beneficiary customers of various banking products viz. Housing Loan, Vehicle Loan, Stand up and Startup, MSME and PM SVANidhi schemes to the tune of ‘300cr.

It is noteworthy that during the month-long “customer outreach programmes”, the Bank of India has sanctioned ‘5000 cr and disbursed more than 4000 cr in the RAM segment alone. Another 8500 cr disbursal was done in corporate segments.

Bank intends to enrol 1500 BCs in these states during this quarter. Field General Manager Arun Kumar Jain, Zonal Manager, New Delhi Zone Ajay Kumar Panth, other senior officers and respective branch heads along with customers were present during the programme. (ANI)



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Towards a level playing field in ‘Business Correspondent’ model of banks

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The Reserve Bank of India (RBI) should rationalise the interchange fees for Aadhaar Enabled Payments System (AePS) transactions and also disincentivise Business Correspondents (BCs) for unfair business activities to generate commission, according to State Bank of India’s economic research report Ecowrap.

This can ensure a level playing field in the BC model followed by public sector banks (PSBs) and other banks.

AePS is a bank-led model that allows online interoperable financial inclusion transactions at point of sale/PoS (micro ATM) through the BC of any bank using Aadhaar authentication.

BCs are retail agents engaged by banks to provide banking services at locations other than a bank branch/ATM.

How to make BCs more viable

PSBs mostly follow ‘branch-led BC model’, while other banks follow ‘branch less/ micro ATM/kiosk application on mobile/corporate BC model’ for financial inclusion.

Three key facts

The report underscored three facts — more than 77 per cent Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts have been opened by PSBs; the number of BCs/customer service points (CSPs) of other banks largely outnumbered that of PSBs and, over the years, OFF-US transactions are increasing.

Data indicate that the share of AePS “OFF-US” transactions (where the card issuing bank and acquiring bank are different entities) in AePS increased from 4 per cent in September 2016 to 51 per cent in September 2021.

In AePS “ON-US” transaction, the card issuing bank and the acquiring bank are the same entity.

“Considering these facts, PSBs (that opened around 77 per cent of the PMJDY accounts) are now net payers of interchange fee. We estimate that the PSBs could be paying ₹600-700 crore per annum as interchange fee,” said Soumya Kanti Ghosh, Chief Economic Adviser, SBI.

He emphasised that since AePS works like a PoS, logically the ‘acquiring bank’ (the bank which has installed the PoS terminal at the merchant location) should pay the interchange fee to the ‘issuing bank’(the bank which has issued the card to the customer).

Alternatively, there could be rationalisation in interchange fee as there is no level playing field in infrastructure provided by all banks.

Holistic financial inclusion

With requisite savings, banks can further strengthen/upgrade their BC model and promote financial inclusion in a more holistic manner, the report said.

Currently, the account opening bank pays an interchange fee to the operator of the BC/ CSP when a customer makes a transaction at micro ATM that does not belong to the account opening bank (that is OFF-US transaction).

At present the interchange fee is 0.5 per cent of transaction amount (minimum ₹1 and maximum ₹15) for an OFF-US financial transaction and ₹5-7 for non-financial transaction.

The report noted that BCs convert AePS ON-US transactions of one set of bank customers to AePS OFF-US issuer transactions and also carry out multiple AePS ON-US and AePS OFF-US transactions on the primary bank application/software.

Women Business Correspondents: Agents of change in India’s financial inclusion

SBI’s economic research department cautioned that the ‘micro ATM/kiosk application on mobile’ model might also lead to several frauds as the mobile BCs introduce themselves as government persons and need biometric authentication to provide different types of subsidy.

PSBs, who are active in financial inclusion activities, have opened a large number of PMJDY accounts (out of 44 crore accounts, PSBs opened 34 crore accounts and non-PSBs 1.3 crore, rest RRBs) with minimal balance and thus incur recurring expenditure by way of servicing such customers, including issuance of free RuPay debit card, besides monthly remuneration for BC operations.

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DEA Official, BFSI News, ET BFSI

Personal Finance

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As of October 2021, about 44 crore beneficiary accounts under the Pradhan Mantri Jan Dhan Yojana (PMJDY) have been integrated with ‘JAM’ (Jan Dhan-Aadhaar-Mobile) trinity thereby helping the government improve the targeting of its programmes by addressing the right section of people, a top official in the Union Finance Ministry said.

“Earlier when I was handling the National Food Security Act, the problem was that a lot of benefits were going from the government, but we were not sure whether they were reaching the right people or not,” said Manisha Sensarma, Economic Adviser, Department of Economic Affairs (DEA), Ministry of Finance.

“Knowing that resources are limited and need to be used in a judicious manner, what we have now tried to attempt through use of technology and leveraging Aadhaar is that intended benefits should reach the eligible and identified beneficiaries so that there is no leakage of resources,” she said.

Sensarma added that in absence of this infrastructure, while facing the challenges of the pandemic it would have been very difficult for the Government to deliver the way the delivery mechanisms were put in place had the PMJDY accounts not been in place.

“During the Covid, there were many benefits that were provided directly into beneficiaries’ accounts via the DBT system,” said Sensarma.

Noting that women are a major component in PMJDY accounts, she said, “In the package that was announced after March 2021, an amount of Rs 500 per month for initial three months for women could be transferred in a very seamless manner because of the existence of PMJDY accounts.”

She added that these benefits which were announced during the Covid pandemic could seamlessly reach the beneficiaries because of the infrastructure that had been created for the downtrodden and those at the bottom pyramid of the population. “For instance, some of the benefits which were transferred during pandemic, it included cash transfers to the vulnerable sections, insurance coverage for health workers, employment provisions and measures for migrant workers, besides, wage component was also increased under Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA).”

Sensarma further said that in order to bridge the gaps by focusing on MSMEs and NBFCs there were relief-based measures as various announcements were made during the pandemic and regulatory compliance measures were announced during this period, so as to streamline the processes.

She said that in an all-India debt and investment survey conducted by NSSO in 2019 whereby about 2,000 rural villages and 4,000 urban blocks were covered, it was found that about 95 per cent of households had at least one financial asset viz., be it a savings account, retirement account, risk free product, insurance account, some savings scheme. “So even the vulnerable sections are getting covered under financial inclusion, that in itself is a pointer that we intend to cover the bottom pyramid of population.”

Talking about the Mudra Scheme – categorised in three parts viz., Shishu, Kishor and Tarun, launched to provide credit to MSMEs as term loans or meeting their working capital requirements, particularly in manufacturing, trading and services sectors she said, “We are happy to record that out of total disbursements, roughly about 87 per cent of the loan disbursements are under Shishu category providing loans up to Rs 50,000. So small entrepreneurs are being addressed and catered to by this scheme. Simultaneously it addresses women entrepreneurs as they account for two-third of beneficiaries covered under Mudra Loans.”

She also said that digital payments have become very resilient and the kind of response being received is very-very encouraging. “As of September 2021, 259 banks had joined the digital space, so technology is helping simplify procedures and make our lives easier including for small vendors.”

She also sought cooperation of all stakeholders including private sector, industrial associations, civil society to further promote financial inclusion, a major enabler to take the country forward.

In his address, Sudatta Mandal, deputy MD, Small Industries Development Bank of India (SIDBI) said that open-based lending is one of the initiatives which SIDBI is going to take.

“We are in the process of working out a pilot scheme for providing unsecured, invoice-based financing through the open network,” said Mandal.

He also said that cash-flow based lending is going to be the trend going forward. “We have to move forward from traditional balance sheet based lending to cash-flow based lending, for that access to alternate data is very important.”



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PMJDY turns 7; brings 43 crore under formal banking system

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As India celebrates its 75th Independence Day, nearly 43 crore poor beneficiaries in the country now have a basic bank account, thanks to Centre’s flagship financial inclusion scheme, Pradhan Mantri Jan Dhan Yojana (PMJDY).

The scheme, announced by Prime Minister Narendra Modi in August 2014, has dispelled initial apprehensions on its efficacy and proved to be a steady vehicle for financial inclusion.

Also read: Over 5.82 crore Jan Dhan accounts inoperative: Finance Ministry

As per latest government data, PMJDY now has 42.89 crore beneficiaries (basic bank account holders) with ₹1,43,834 crore total balance. More than half of the beneficiaries are women (23.76 crore) while 28.57 crore are from rural and semi urban areas.

‘Unparalled achievement’

When asked on the impact of the scheme so far, D Janakiram, Director, Institute for Development and Research in Banking Technology (IDRBT), an arm of RBI, said, “PMJDY has done extremely well so far… The massive financial inclusion achieved by the scheme is unparalleled.”

A senior official of State Bank of India said the average balance in the accounts which is hovering around ₹3,000-3,500 across banks is ‘an indication’ that the scheme has now become a channel for savings for the low income families.

“The total deposit balance of ₹1.43-lakh crore is actually a huge amount. Our studies have shown that a good number of these accounts are being regularly used,” Prasanna Tantri, Exectuive Director, Center For Analytical Finance, Indian School of Business (ISB) said.

The Global Findex data base of the World Bank has also shown ‘substantial’ increase in financial inclusion in the country after 2014. As per the index, 80 per cent of people above 15 years of age in the lower-middle income group have a bank account now compared to 53 per cent in 2014.

The next step

While the contribution of PMJDY has well been recognised, there is also a need to scale up to the next level, say experts.

Also read: Why PMJDY must be scaled up to next level

“Going forward, we should move from financial inclusion to financial empowerment by providing credit. The PMJDY should become PM Jan Dhan Vridhi with universal access to bank credit to the most underprivileged sections of our society,” the IDRBT chief said.

It would also need a model of credit history, which will require reduction in cash transactions and moving to digital transactions and building credit models using artificial intelligence/machine learning techniques, he added.

“We should think of building India’s next generation digital financial infrastructure focusing on these needs and to reduce per transaction cost as well as the maintenance cost of these accounts,” Janakiram said.

According to Tantri, there is a need to build up a data base to capture the income, transaction history of the Jan Dhan account holders on the basis of which credit delivery models can be worked out. “As of now, we have only aggregate data. Banks and Fintechs can do further data analysis to create a new data base,” he added.

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All about RuPay, India’s payments network, BFSI News, ET BFSI

Personal Finance

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-By Ishan Shah & Tarika Sethia

What is RuPay?

The National Payments Corporation of India’s (NPCI) brainchild, RuPay is a native card payments network initiated by the Reserve Bank of India (RBI). It is a financial services and payment services system launched in 2012 and dedicated to the country in 2014. A fusion between ‘rupee’ and ‘payment’ inspired its name along with the intent to bring India into the global payments market via its indigenous card facility.

Why was RuPay launched?

The proposition of a cashless India was enhanced with the introduction of the RuPay cards. Building a cashless economy requires financial inclusion and RuPay reached rural India and boosted digital payments with the Pradhan Mantri Jan Dhan Yojana scheme. Under PMJDY, 258 million RuPay debit cards were issued in 2020 alone from public sector banks under the Indian government’s financial plan. From 15% in 2017 to over 60% in 2020, RuPay’s Indian market share has accelerated.

Moreover, with no domestic payments network, banks were forced to pay high affiliation charges to multinationals like Mastercard and Visa for trusted associations. Hence, NPCI was created as a non-profit payments company to construct an affordable and accessible payments network for Indians.

Where are RuPay cards accepted?

They are accepted at all ATMs, by POS machines in India, and for domestic online and offline shopping. They aren’t accepted internationally except at those ATMs, POS machines and e-commerce websites where ‘Discover Financial Service’ (DFS) and ‘Diner’ is enabled. Presently, cards under RuPay Global are accepted at over 42.4 million POS locations and over 1.90 million ATM locations in over 185 countries.

Why a RuPay card?

Being a domestic framework, banks issuing RuPay cards are at an advantage as they are not required to pay network registration fees unlike in the case of a Visa or MasterCard registration. With a zero merchant discount rate (MDR), banks have also agreed to charge nothing on UPI and RuPay card transactions. This has made RuPay transactions preferable while also stimulating FinTechs to innovate and provide better payment products to customers because of the ease of UPI and RuPay payments framework.

All about RuPay, India's payments network

It also has a greater reach in rural areas. Under the PMJDY scheme, free RuPay debit cards were given to all bank account holders. As all processing of transactions happens in the country, there is also a lower settlement cost.

RuPay has both debit and credit cards for individuals, corporates, and prepaid cards; there’s a ‘Kisan Credit Card’ available as well. There’s also a ‘contactless’ card that facilitates transactions on a single tap, making payments without disclosing crucial card details.

What does RuPay’s future look like?

With a recent ban on new issuances by MasterCard, RuPay has an opportunistic freeway to capture the credit and debit card market in India. As of November 2020, around 603.6 million RuPay cards have been issued by nearly 1,158 banks.

All about RuPay, India's payments network

Banks are also pushing towards a higher RuPay card issuance after FM Nirmala Sitharaman said, “RuPay card will have to be the only card you promote. Whoever needs a card, RuPay will be the only card you would promote and I would not think it is necessary today in India when RuPay is becoming global, for Indians to be given any other card first than RuPay itself,” at the 73rd annual general meeting of the Indian Banks’ Association (IBA) last year.

Even in the credit space, Visa and MasterCard have made themselves comfortable at the top with huge amounts of credit card transactions happening via POS machines. RuPay can conquer the card space.



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Why PMJDY must be scaled up to next level

Banking & Finance

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The Pradhan Mantri Jan Dhan Yojana (PMJDY) should be scaled up to the next level to provide access to formal credit and push digital transactions further, according to experts.

Launched under the National Mission for Financial Inclusion in August 2014, the Jan Dhan scheme has now been labelled as the largest financial inclusion scheme in the world, with over 42.3 crore no-frills accounts (beneficiaries) and a total balance of ₹1,44,169 crore as on May 12.

Of the total beneficiaries, about 28 crore are from rural- and semi-urban areas and over 50 per cent are women.

The flagship scheme of the Centre has resulted in almost every household having access to formal banking services, along with a platform for availing low-value credit, insurance and pension schemes, and a delivery channel in emergency situations such as the Covid-19 pandemic.

Notwithstanding these gains, it is the need of the hour to scale up the scheme to the next level to reap complete benefits of financial inclusion and digital advantages achieved so far.

Digital push

“With Aadhaar and minimal documents, the digital identity is established for the creation of Jan Dhan accounts,” D Janakiram, Director, Institute for Development and Research in Banking Technology (IDRBT), an arm of the RBI, told BusinessLine. Once the bank account is linked to the UPI (unified payment interface), this enables mobile payments with a number of third-party apps, including Google Pay.

“The sheer convenience of cashless payments using mobile phones has enabled a large number of people to adopt digital payments during the pandemic. UPI has witnessed manyfold increase in terms of the number of transactions in recent times, touching a few billion transactions per month,” said Janakiram.

First objective

According to Janakiram, the Jan Dhan scheme has achieved the first objective of creating digital identity, but there is a need to scale up the digital infrastructure to reduce costs per transaction. At the moment, the number of ATM withdrawals for these accounts is kept at four in a month, which leads to heavy cash withdrawals and cash transactions. “If there is no limit for ATM withdrawals in a month (which can happen only when costs per transaction reduce drastically, which will need technology adoption, including cloud adoption), speculative cash withdrawals will reduce,” he observed.

“The economy also needs to move from financial inclusion to financial empowerment, which means we need to transform Jan Dhan accounts into Jan Dhan Vriddhi accounts with access to credit and digital infrastructure to monitor and model risk,” Janakiram added.

Credit access

A research study undertaken by Prasanna Tantri, Executive Director, Centre for Analytical Finance, Indian School of Business, also underscores the need to take the scheme to the next level.

“My research has shown that the programme has made a significant positive difference to the economic lives of the poor. The movement of account balances during the pandemic shows that poor households have used these balances during difficult times. In the next stage, the government should focus on improving access to formal credit to the poor,” said Tantri.

As per the structure of the scheme, PMJDY beneficiaries in the age group of 18-65 are eligible for an OverDraft (OD) of ₹10,000.

However, no information is available about the status of overdrafts. The government also announced a group loan scheme for PMJDY beneficiaries a couple of years ago.

“I am not sure about the status of those loans. Instead of focussing on newer plans to push credit, the government will do well to make sure that the information about PMJDY accounts is made available to credit bureaus and, more importantly, to the emerging fintechs,” said Tantri.

There is rich information in the transaction pattern, the nature of the transactions, the quantum of balance, the sources of funding, and the timing of transactions, which will enable the development of a credit score for PMJDY account holders.

The government may take the initiative in this regard by asking credit bureaus to work on it. Once a score is developed, formal private credit is likely to follow, said Tantri, adding that the 44 crore PMJDY beneficiaries could serve as an attractive market for fintechs.

Financial education

The government can also think of a financial education programme for PMJDY beneficiaries. It appears there is a permanent component of savings in savings accounts. The savers can earn more by converting some of the balances into fixed deposits.

According to RBI Governor Shaktikantha Das, financial inclusion in the country is poised to grow exponentially, with digital-savvy millennials joining the workforce, social media blurring the urban-rural divide, and technology shaping the policy interventions. Going forward, there needs to be greater focus on penetration of sustainable credit, investment, insurance and pension products by addressing demand-side constraints with enhanced customer protection, said Das in a speech in December 2020.

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