Jan Dhan Yojana: showing small, but steady impact on our lives

Launched by Prime Minister Narendra Modi in August 2014, just months after assuming office, Jan Dhan Yojana is India’s mission for financial inclusion and last mile connectivity, is finally showing small, but impactful results. According to the website, as on 18th October, 30.49 crore beneficiaries have banked so far with about Rs. 67,316.28 crore balance in their accounts.

In a 2017 working paper, Georgetown University professor Sumit Agarwal and his co-authors studied account activity in 1.5 million PMJDY (Pradhan Mantri Jan Dhan Yojana) accounts from August 2014 to May 2015. The study revealed that while the usage started off slow, as about 81% of new consumers did not make any deposits in the first six months, once they got aware about financial services, they embraced the banking system. Within one year, the frequency of remittances and deposit and withdrawal transactions gradually reached the same level as a comparable set of accounts opened before the PMJDY. Along with demand, the supply of financial products rose as well.

The authors found an increase in lending in regions where the PMJDY generated new demand for formal credit. The scheme has tapped into the unmet demand for financial services. Contrary to allegations, the spurt in new accounts under PMJDY does not seem to be linked to demonetisation. While the investigations are on regarding the spike in bank accounts, maintenance of stable balances and increase of banking transactions seems to be disproving these allegations.

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Not just that, bulk of the RuPay card transactions are through ATMs, while about 25-30 million customers have started transacting via point of sale (PoS) terminals, signifying the advent of e-commerce and digital transactions in rural India, thus catering to the rural and semi-urban brackets. Studies also show that the accounts opened under PMJDY are steadily being used actively, with as many as 70% accounts moving from dormancy to active use. There has also been significant decrease in zero-balance accounts. When the scheme was launched in August 2014, there were about 76.81% zero-balance accounts in September, 2014. This has come down to about 20% of the total accounts.

Surprisingly, not just financial inclusion and stability, PMJDY has also helped villagers in cutting down on alcohol and tobacco. The statistically significant and economically meaningful drop in consumption of intoxicants has been found in the rural areas which have more Jan Dhan Accounts. The report said that better channelising of subsidies could have helped in curbing unproductive expenditure on alcohol and tobacco expenditure in rural India.

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