Part 1: Pradhan Mantri Jan Dhan Yojana


Author: Kunal Damle

In continuance to the earlier posts on the achievements made by the Honourable Prime Minister Narendra Modi’s NDA Government the Flagship achievement has been the Pradhan Mantri Jan Dhan Yojana (PMJDY).

Launched with great fanfare in August 2014, the aim of the scheme is to ensure access to financial services viz. Banking / Savings and Deposit Account, Insurance, remittance, Credit and Pension (Source: With majority of the Indian population illiterate and unable to access formal financial institutions, this was a step in the right direction.  The Government through this scheme has encouraged people to open accounts with public and private sector banks. One fear people have had in the past has been the Know Your Customer (KYC) documentation in addition to a fear of walking into the branch as most people in the lower income bracket find it difficult to converse with the bank staff. With the ease of getting an Aadhar Card (Source: which is a Social Security Card, it also works as an Identity Card that can be utilized as a one document identity to open an account. The Government has had many camps in various cities to get people to get an Aadhar Card which has now become a one point ID Card for people at many Government offices and helps as a single KYC tool. The same can be utilized as a one document identity to open an account; one gets to open an account with no minimum balance, receives a RuPay Debt card and will also receive interest on Deposits made.

By walking the line and getting the account opened the citizen has now access to formal source of banking. One can access credit through the bank, rather than informal money lenders where one could get stuck in the vicious cycle of exorbitantly prohibitive terms of credit. Additionally the person would be able to keep money in the account rather than carry cash which encourages a non cash Society. When cash transactions are involved especially in India, these are from non-taxed income pool. As a society, by encouraging non cash transactions, the Government is pushing for a society to be part of the taxable pool thereby being able to track money velocity more accurately.

With the introduction of a direct payment of subsidy into the account, the Government has addressed a key issue of pilferage which has been a bane of many governments; many a middleman have made money of the amounts that should have gone to citizen but have been pilfered by middle man.  An example of the same was seen in UP (Source:

However, this scheme is no one-way street with one seeing the benefits to banks as well, with low cost funding coming through the Current Account Savings Account (CASA). Public sector banks in India have been saddled with a large Non Performing Loans problem (Source: and by raising CASA deposits, banks now have access to a cheap source of funding. By also providing insurance, lower income bracket citizens now have a chance to get life insurance coverage at a low cost.

With the above the Government has put the country on the right track for financial inclusion.

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2 thoughts on “Part 1: Pradhan Mantri Jan Dhan Yojana

  1. The new Jan Dhan Yojana (JDY) makes perfect sense…logically. A great number of accounts, however, are zero or near zero deposit accounts. There is a well-known saying in financial economics: that bankers prefer to have 100 accounts of $100,000 each rather than have 100,000 accounts of $100 each. The transaction costs are just too high, which is also the reason why the notion of micro credit, distinct from general banking, was evolved. The (in)efficiency levels of the public sector banks in India are already high and the the JDY this would further strain these banks.


  2. Hi Sarthi – you have made a fair point, PSU Bank efficiency leaves a lot to be desired. The advent of technology for one has changed that, and with more people moving to mobile banking it can only improve. I would still prefer people coming into the banking fold then being out of it, the ills associated with it are far higher. Illegal Money Lending, pilferage of Subsidy are bigger problems. With improving education and job prospects many of the zero balance accounts could turn into money making for the bank’s. It is too early to call how over worked the banks are and how (in) efficient service will be.

    Thank you for the comment.


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