Banking the unbanked

 The completion of nine years of the Pradhan Mantri Jan Dhan Yojana (PMJDY), the national mission for financial inclusion, also marks a significant milestone in women’s empowerment in India. Around 56% of Jan-Dhan account holders are women, and given that around 67% of Jan-Dhan accounts are in rural and semi-urban areas, achievements under this mission also signify the financial inclusion of a large section of rural women. Pushing financial literacy among PMJDY beneficiaries in a big way to encourage them to save more and spend judiciously will help script a new growth story, particularly in rural India. Official data shows that PMJDY accounts grew 3.4-fold from 14.72 crore in March 2015 to 50.09 crore as of August 18. The cumulative deposit balance in these accounts has grown to Rs. 2.03 lakh crore from just Rs. 14.72 crore in March 2015. The average balance per account has increased to Rs. 4,063 from Rs. 1065, proving the sceptics wrong about the utilization of these accounts. The average balance per account, however, varies from state to state. The number of RuPay cards and their usage by account holders have increased, but against 50.09 crore accounts, 33.98 crore have been issued this card, and more than 16 crore account holders are yet to avail themselves of the benefits of offline and digital transactions using the card. The primary objective of PMJDY is to ensure access to financial products and services such as banking, savings, and deposit accounts, remittances, credit, and insurance at an affordable cost. The flagship scheme is anchored on three basic tenets: banking the unbanked, which requires the opening of a basic savings bank deposit account with minimal paperwork, relaxed KYC, e-KYC, account opening in camp mode, zero balance, and zero charges; securing the unsecured through the issuance of indigenous debit cards for cash withdrawals and payments at merchant locations, with free accident insurance coverage of Rs. 2 lakh; and funding the unfunded to make available other financial products like microinsurance, overdraft for consumption, micro-pension, and micro-credit. Improved access to formal credit can act like a shield, particularly for rural women and marginalised urban women account holders, from loan sharks and money lenders in the informal credit market. With the issue of over 33.98 crore RuPay debit cards under PMJDY, the installation of 79.61 lakh PoS (point of sale) and mPoS machines, and the introduction of mobile-based payment systems like UPI, the total number of digital transactions has gone up from 1,471 crore in 2017-18 to 11,394 crore in 2022–23. The total number of UPI financial transactions has increased from 92 crore to 8,371 crore, and the total number of RuPay card transactions at PoS and e-commerce has increased from 67 crore to 126 crore during this period, according to an official release. The figures are indicative of robust utilisation of banking products and services by Jan-Dhan account holders, but given the number of total account holders, there is enough elbow room for accelerated growth. About 6.26 crore account holders receive direct benefit transfers from the government under various schemes, which implies that the rest (87% of account holders) need to increase their deposits on their own, where financial literacy plays a crucial role in leveraging financial inclusion for augmenting household economies and contributing to overall economic growth through active participation in economic activities. Awareness among PMJDY beneficiaries against debit card and other forms of banking fraud is the key to protecting them from such vulnerabilities. The public sector banks account for 39.16 crore of the total 50.09 crore accounts, followed by regional rural banks with 9.31 crore accounts, while private sector banks account for only 1.43 crore beneficiaries, and thus the private sector banks have so far contributed little to this national mission. Out of 6,01,328 mapped inhabited villages, 99.63% are covered by a banking outlet such as a bank branch, business correspondent (BC), or Indian Post Payments Bank (IPPB) branch through 1.71 lakh branches, 7.70 lakh BCs, and 1.44 lakh India Post Payments Banks, and this large network of outlets that provide services within a radius of 5 km has made it possible for India to script the success story of the largest financial inclusion in the world. About 5 to 6 crore PMJDY accounts lying dormant point towards banking services as well as financial literacy not reaching out effectively to these account holders. The Central Government has envisaged coverage of PMJDY account holders under microinsurance schemes and has already communicated to the banks about their coverage under the Pradhan Mantri Jeevan Jyoti Bima Yojana and the Pradhan Mantri Suraksha Bima Yojana. It also underscores the need to promote digital payments, including RuPay debit card usage, among PMJDY account holders through the creation of acceptance infrastructure across India and improving their access to microcredit and microinvestments such as flexi-recurring deposits. An intensified financial literacy drive among PMJDY beneficiaries will boost confidence among account holders, particularly among rural women beneficiaries.