Why in the News?

• Finance Minister Nirmala Sitharaman said the government aims to open more than 3 crore accounts under Pradhan Mantri Jan Dhan Yojana (PMJDY). Wednesday marks the 10th anniversary of the scheme.

What’s in Today’s Article?

• About PMJDY (Objectives, Key Features, Achievements, Challenges, etc.)
• News Summary

About Pradhan Mantri Jan Dhan Yojana:

• The Pradhan Mantri Jan Dhan Yojana (PMJDY) is a flagship financial inclusion initiative launched by the Government of India on August 28, 2014.
• The scheme aims to provide affordable access to financial services such as banking, savings and deposit accounts, remittances, credit, insurance, and pension to the unbanked population in the country.
• It is one of the largest financial inclusion initiatives in the world, designed to promote inclusive growth by ensuring that every household has access to essential financial services.

Objectives of the Scheme:

• Financial Inclusion: The primary objective of PMJDY is to ensure that every household in India has at least one bank account, thereby bringing the unbanked sections of society into the formal financial system.
• Access to Financial Services: The scheme aims to provide access to a wide range of financial services, including basic savings accounts, access to need-based credit, remittances, insurance, and pension.

Key Features of the Scheme:

• Zero Balance Accounts: Under PMJDY, beneficiaries can open a basic savings bank account without any requirement of maintaining a minimum balance. However, if the account-holder wishes to get a cheque book, they need to fulfil the minimum balance criteria.
• RuPay Debit Card: Each account holder under the scheme is provided with a RuPay debit card, which can be used for cash withdrawals, making payments, and purchasing goods and services. The RuPay card also comes with an in-built accident insurance cover of Rs. 1 lakh (which has been increased to Rs. 2 lakh for accounts opened after August, 2018).
• Overdraft Facility: PMJDY accounts are eligible for an overdraft facility of up to Rs. 10,000 after six months of satisfactory operation. This facility acts as a credit line for account holders, helping them meet urgent financial needs.
• Life Insurance Cover: Account holders under PMJDY are also eligible for a life insurance cover of Rs. 30,000, provided they open the account before a specified date and meet other eligibility criteria.
• Direct Benefit Transfer (DBT): PMJDY accounts are linked to the Direct Benefit Transfer (DBT) scheme, enabling beneficiaries to receive government subsidies, pensions, scholarships, and other payments directly into their bank accounts.
• Mobile Banking Facility: The scheme also offers basic mobile banking facilities to account holders, enabling them to check their account balance, transfer funds, and perform other banking transactions using their mobile phones.

Impact & Achievements:

• Financial Inclusion: As of 2024, more than 53 crore active PMJDY accounts exist with a total deposit balance of ₹2.3 lakh crore. The scheme has significantly contributed to the financial inclusion of millions of unbanked households.
• Women Empowerment: Over 55% of PMJDY account holders are women, promoting gender equality and empowering women by providing them with access to financial services.
• Rural Penetration: Approximately 67% of the accounts opened under PMJDY are in rural and semi-urban areas, ensuring that financial services reach the remote and underserved regions of the country.

Major Challenges:

• Dormant Accounts:
  • A significant number of Jan Dhan accounts remain inactive or have very low balances. Many account holders, particularly in rural areas, do not actively use their accounts due to a lack of awareness, financial literacy, or limited access to banking services.
  • This dormancy reduces the effectiveness of the scheme, as the financial inclusion goal is not fully achieved if accounts are not being utilized for transactions, savings, or other financial activities.
• Limited Financial Literacy:
  • A considerable portion of the population, especially in rural areas, lacks basic financial literacy. This includes understanding the benefits of having a bank account, using digital banking services, or managing personal finances.
  • The lack of financial literacy leads to underutilization of the services offered under PMJDY, such as overdraft facilities, insurance, and pension schemes.
• Infrastructure Challenges:
  • In many remote and rural areas, there is limited access to banking infrastructure, such as bank branches, ATMs, or banking correspondents. This makes it difficult for account holders to access banking services, deposit or withdraw money, or seek assistance.
  • Connectivity issues, especially in rural regions, also affect the functioning of mobile banking services and digital transactions, limiting the reach of the scheme.
• Operational Burden on Banks:
  • The large-scale opening of Jan Dhan accounts has put an additional operational burden on banks, particularly public sector banks, which often struggle with limited resources and staff.
  • Managing a high volume of low-balance accounts increases the cost for banks, as they have to maintain these accounts and provide services with minimal financial returns.

News Summary:

• On the 10th anniversary of the Pradhan Mantri Jan Dhan Yojana (PMJDY), Finance Minister Nirmala Sitharaman announced the government's goal to open over 3 crore new accounts, aiming to cover the entire adult population.
• RuPay debit cards, which include a ₹2 lakh accident insurance cover, have been issued to 36.14 crore account holders.
• PMJDY has played a crucial role in providing financial support through various government schemes, especially during the COVID-19 pandemic, with 56% of the accounts belonging to women.
• The scheme has made significant strides in financial inclusion, particularly in rural and semi-urban areas, with 66.6% of accounts opened in these regions.
• The Jan Dhan-Aadhaar-Mobile (JAM) trinity has propelled India's financial inclusion rate to 80% of adults, a remarkable achievement in just six years.
• Additionally, India's digital infrastructure has enabled government-to-person (G2P) transfers totalling $361 billion, benefiting millions of citizens across the country.