| Introduction: Contextual Introduction Body: Highlight the impact of PMJDY on financial inclusion and the challenges associated with it. Conclusion: Way forward |
The Pradhan Mantri Jan Dhan Yojana (PMJDY) has significantly impacted financial inclusion in India by bringing millions of unbanked individuals into the formal financial system.
Impact on Financial Inclusion:
- Increased Bank Accounts: PMJDY has led to a surge in bank accounts, particularly in rural and underserved areas. The scheme has successfully opened over 53.1 crore bank accounts, significantly narrowing the gap between rural and urban access to banking.
- Government Benefits: The PMJDY’s impact extends beyond just providing bank accounts. It has enabled the integration of the JAM trinity (Jan Dhan, Aadhaar, and mobile), which has revolutionized the delivery of government benefits through direct benefit transfers (DBTs). This system has improved targeting and reduced leakages, with total cumulative transfers reaching Rs 38.5 lakh crore.
- Reduce gender disparity: Approximately 67% of accounts are in rural and semi-urban areas, and 56% of the account holders are women, highlighting the scheme’s role in bridging both regional and gender disparities in financial access.
- Financial Support: The scheme has also supported citizens during crises, such as providing financial aid to women Jan Dhan account holders during the COVID-19 pandemic. Moreover, the Unified Payments Interface (UPI), linked to the JAM framework, has transformed payment systems, enabling financial transactions for low-income households.
Challenges
- Low Usage: Despite the rise in bank accounts, many beneficiaries, particularly in rural areas, have limited usage. This is due to factors like low financial literacy, restricted access to ATMs and banking infrastructure, and concerns about fraud.
- Account Dormancy: A substantial number of PMJDY accounts have become dormant, often because beneficiaries lack proper documentation or are unaware of the advantages of keeping their accounts active.
- Exclusion of Vulnerable Groups: While PMJDY has advanced financial inclusion, certain vulnerable populations, such as the elderly, disabled, and those in remote areas, still struggle to access its benefits.
- Digital Divide: The growing dependence on digital banking services presents challenges for those without access to smartphones and internet connectivity, potentially excluding them from the benefits of PMJDY.
Conclusion
The banking system faces challenges in managing the costs of opening and servicing PMJDY accounts. There is a need to develop financial products tailored to low-income households, considering their irregular incomes and lack of collateral. The new Unified Lending Interface could help address the needs of these underserved segments.
