Pradhan Mantri Narendra Modi in his first Independence speech announced the major initiative of financial inclusion in the name of the Pradhan Mantri Jan Dhan Yojana(PMJDY) to mainstream the poorest of the poor to the formal economic system of the country. The scheme was launched on August 28, 2014. The Prime Minister in his emotional speech declared, “Mahatma Gandhi worked towards removing social untouchability. If we want to get rid of poverty, we have to first get rid of financial untouchability. We have to connect every person with the financial system”. In fact, after 68 years of Independence, 42% of households do not have bank accounts and only 35 % of Indians older than 15 years had a bank account in a formal financial institution in 2012. Financial inclusion is the process where financial services and banking facilities are easily accessible to the weakest and marginalized sections of the society in the remotest corner of the country. Financial inclusion is not only important in removing poverty and deprivation but also helps in growth and development of the economy. The PMJDY scheme was launched in two phases: Phase I (August 2014-January 2015) and Phase II (August 2015 to August 2018). Initially, the target was to open 7.5 crore bank accounts in one year. As of August 16, 2017, 29.51 crores, Jan Dhan Accounts are opened in the country.
In this article, I will do the SWOT (Strengths, Weakness, Opportunities, and Threats) of the Pradhan Mantri Jan Dhan Yojana (PMJDY).
- Financial mainstreaming of the poorest of the poor of the country to create inclusive growth and development. As per the PMJDY website, 99% of the households now have at least one bank account.
- It will help in generating higher savings for the poor people. As per one study[i], availability of bank branches positively impacts savings. As per the recent study conducted by State Bank of India(SBI)[ii], Jan Dhan Accounts are keeping villagers sober and it might be helping in slowing rural inflation.
- Account holders will get the overdraft facility of ₹5000. It can help the people to start some self-employment activities which have the potential to improve their well-being and it will strengthen their decision-making abilities.
- It will provide accident insurance cover of ₹1 lakh to deal with tragedies and shocks of life for the poor households.
- It will provide RuPay debit card to every account holders to access the facility of cashless transactions.
- As per various reports[iii], it was found that one-fifth of these Jan Dhan accounts are dormant and 79 % of the households[iv] already had a regular bank account. Therefore, dormancy and zero balance accounts are serious challenges of this scheme.
- As per the data, only 1.5% account holders have sanctioned loans and around half of the account holders did not even avail the loan. The loan facility is provided on the basis of the discretion of bank employees which can create some biases in disbursing the loans.
- As per the RBI report[v], Jan Dhan accounts were misused during the demonetization process last year and a large sum was deposited to these accounts.
- The absurd limit of ₹50,000 stops some poor people[vi] to receive their subsidies in the Pradhan Mantri Awas Yojana (PMAY)[vii].
- Only 76% of the Jan Dhan account holders got a Rupay card[viii] and at least one in five of the issued cards remained dormant.
- It can help in implementing the Direct Benefit Transfer(DBT)[ix] scheme in terms of JAM trinity solution where J-Jan Dhan, A-Aadhaar, and M-Mobile. JAM[x] can usher into a radical transformation to provide social benefits directly to the bank accounts of the people, in turn, reducing hassles and massive leakages prevalent in the social-security schemes.
- Digital India scheme[xi] and government’s consistent push for Mobile banking[xii] can create a conducive climate for increasing financial inclusion. In fact, after the demonetization of high-value currencies, there is a consistent increase in digital payment.
- It can be used to provide for funding facilities to vulnerable sections of the society. In fact, as per the Gates Foundation Report[xiii], it helped in financially empowering the women and marginalized sections of the society.
- MUDRA yojana[xiv] and Stand-Up India[xv] scheme can create opportunities for Jan Dhan Yojana to create business opportunities by providing funding to the ‘unfunded’ as well as ‘unbanked’ sections of the society.
- It can help in increasing the ‘financial literacy’ in the country which will help in increasing the penetration of various financial services like insurance, loans, investment options etc. to far-flung areas of the country.
- The first and most obvious threat can come from the next government which comes into power if it is not BJP. They might scrap the whole scheme on various grounds.
- Sustainability of these accounts in serving the long-term interests of providing financial services to the poorest sections of the society when they are not provided with gainful employment opportunities or the other ways of generating income.
- Recently Supreme Court of India has given its verdict in the Aadhar case and provided “the Right to Privacy”[xvi] to every individual in the country. On the face of it, linking bank accounts with Aadhar number can create hurdles for the scheme in providing direct benefit transfer.
- Misuse of these Jan Dhan accounts and RuPay cards will always be a threat to this program of the government. Due to this, a number of Jan Dhan accounts were closed during demonetization because of their suspicious activities[xvii].
- The overdraft facility and insurance scheme can also increase the NPA (Non-performing Assets) of the Banks who are already stressed due to stalled projects of the private and public sectors.
The Pradhan Mantri Jan Dhan Yojana is the game-changer[xviii] scheme of the NDA (National Democratic Alliance) to create a medium to mainstream the poorest of the poor of the country so that an era of social-transformation can be ushered in our country. The use of these accounts to transfer the cash benefits to the beneficiaries’ accounts can turn into a panacea to all the ills which are plaguing the social security schemes of the government. However, after three years of the scheme, the government should also focus on addressing the challenges[xix] emanating from the schemes.
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One of the major verticals of Pradhan Mantri Awas Yojana (PMAY) is Credit Linked Subsidy Scheme (CLSS) for Lower Income Group/Economically Weaker