{"id":35401,"date":"2018-10-31T17:14:30","date_gmt":"2018-10-31T11:44:30","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=35401"},"modified":"2018-10-31T17:14:30","modified_gmt":"2018-10-31T11:44:30","slug":"the-admirable-success-of-the-jan-dhan-yojana","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/the-admirable-success-of-the-jan-dhan-yojana\/","title":{"rendered":"The admirable success of the Jan Dhan Yojana:"},"content":{"rendered":"<p><a href=\"http:\/\/www.livemint.com\/Opinion\/wfertnZlyGRTmGiyGnJLrI\/The-admirable-success-of-the-JanDhan-Yojana.html\"><span style=\"font-weight: 400;\">The admirable success of the Jan Dhan Yojana<\/span><\/a><span style=\"font-weight: 400;\">:<\/span><\/p>\n<p><b>Context<\/b><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\">The government\u2019s flagship financial inclusion drive, is one of the grandest policy initiatives of its kind.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">With an initial target of opening 75 million accounts by January 2015 under the Pradhan Mantri Jan Dhan Yojana (PMJDY), Modi\u2019s administration mobilized an oft-recalcitrant state apparatus to expand access to basic savings accounts with additional benefits in the form of debit cards, insurance cover, and overdraft facilities.<\/span><\/li>\n<\/ul>\n<p><b>The progress report<\/b><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\">The government has opened more than 294 million accounts as of August 2017.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">However, it was unclear whether increasing the supply of such accounts (introduced by the Reserve Bank of India in 2005) would guarantee that account holders engage in financial transactions.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Researchers have only recently acquired data of sufficient vintage from administrative records on the transactions in PMJDY accounts to individual and household-level survey data that yields preliminary findings on India\u2019s progress towards genuine financial inclusion.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Opening the banking floodgates, this new research finds, enhanced account use and brought marginalized groups into the financial mainstream.<\/span><\/li>\n<\/ul>\n<p><b>Work on PMJDY, Georgetown University<\/b><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\">In a 2017 working paper, Georgetown University professor Sumit Agarwal and his co-authors studied account activity in 1.5 million PMJDY accounts from August 2014 to May 2015.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">While usage started off slowly, 81% of new consumers did not make any deposits in the first six months.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Individuals inclined to become more proficient as their awareness of financial services grew.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">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, with a concomitant increase in monthly account balance.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Along with demand, the supply of financial products rose as well.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The authors found an increase in lending in regions where the PMJDY generated new demand for formal credit.<\/span><\/li>\n<\/ul>\n<p><b>Research at Indian School of Business, and University of Maryland<\/b><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\">Yakshup Chopra and Prasanna Tantri, researchers at the Indian School of Business, and University of Maryland professor Nagpurnanand R. Prabhala, tracked activity in more than 3,000 PMJDY accounts from August 2014 to October 2016 (prior to demonetization).<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Their analysis also found evidence of PMJDY accounts catching up with their counterparts over time, with the differences in usage between both type of accounts shrinking by close to half between the first and the seventh quarter.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The average account balance of PMJDY accounts more than doubled in the same period.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Similar to the \u201clearning\u201d phenomenon observed by Agarwal and his co-authors, these researchers found that increase in ATM usage among PMJDY account holders surpassed those without such accounts.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Beyond enabling account ownership and the use of financial services, the PMJDY also facilitated financial inclusion for a variety of demographics.<\/span><\/li>\n<\/ul>\n<p><b>Report by the Overseas Development Institute<\/b><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\">The Overseas Development Institute\u2019s Manuela Kristin G\u00fcnther examined data from several recent rounds of the Financial Inclusion Insights (FII) survey of individuals as well as the 2015 FinScope survey of households in four low-income states, and found that socioeconomic hurdles were attenuated.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Women, low-income individuals, rural residents, and the less educated enjoyed greater account ownership following the PMJDY.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Owning an account also appeared to weaken significant constraints like large household size, distrust of financial institutions, and distance to the nearest bank branch.<\/span><\/li>\n<\/ul>\n<p><b>What was common in all the research work?<\/b><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\">The PMJDY\u2019s ability to tap a deep well of unmet demand for financial services was a common theme running through these studies.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The 2017 round of the FII confirmed that many of these gains were not ephemeral.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">There was negligible variation in PMJDY account ownership on the basis of gender, urban or rural residency, and income levels.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">In terms of account registration and transaction activity, PMJDY account holders were ahead of those with non-PMJDY accounts.<\/span><\/li>\n<\/ul>\n<p><b>The second volume of the 2016-17 Economic Survey findings<\/b><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\">The average account balance in PMJDY accounts effectively doubled between 2015 and 2017, zero-balance accounts declined by more than half between 2015 and 2016, and cross-bank transactions facilitated by business correspondents grew sharply.<\/span><\/li>\n<\/ul>\n<p><b>Concerning Issues<\/b><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\">Account duplication and dormancy remain key stumbling blocks.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Chopra and his co-authors found that the PMJDY accounts were less likely than other accounts to move out of inactivity.<\/span><\/li>\n<\/ul>\n<p><b>2016 national survey by Microsave<\/b><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\">A financial inclusion consultancy, estimated that 33% of PMJDY customers already had a bank account, and 28% of all PMJDY accounts were inactive.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Misunderstandings about the policy are widespread.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The government\u2019s impulse to route direct benefits transfers through these accounts was a possible driver for duplication, with several beneficiaries opening second accounts expressly to receive benefits.<\/span><\/li>\n<\/ul>\n<p><b>The 2017 FII survey<\/b><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\">It observed that not only was there a higher account inactivity rate among women, rural residents, and below- poverty-line individuals overall, the same groups were more likely to report being unaware if their account was opened under the PMJDY.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Regional variation is another arena with room for improvement: G\u00fcnther found large asymmetries in both account ownership and activity across Indian states.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Finally, while business correspondents contributed significantly to realizing last-mile banking, they were relatively underutilized for regular financial services &#8211; a consequence, as Microsave ascertained, of low and irregular commissions per transaction.<\/span><\/li>\n<\/ul>\n<p><b>Conclusion<\/b><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\">These studies provide initial insights into the extraordinary impact of the PMJDY and outline opportunities for course correction.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">While the programme has made significant headway towards genuine financial inclusion, it is clear that improving policy communication, widening and deepening progress in low-income states, and ironing out the kinks in the bank-agent model will be crucial if these hard-fought gains are to prove sustainable.<\/span><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>The admirable success of the Jan Dhan Yojana: Context The government\u2019s flagship financial inclusion drive, is one of the grandest policy initiatives of its kind. With an initial target of opening 75 million accounts by January 2015 under the Pradhan Mantri Jan Dhan Yojana (PMJDY), Modi\u2019s administration mobilized an oft-recalcitrant state apparatus to expand access&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/the-admirable-success-of-the-jan-dhan-yojana\/\">Continue reading <span class=\"screen-reader-text\">The admirable success of the Jan Dhan Yojana:<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[555],"tags":[],"class_list":["post-35401","post","type-post","status-publish","format-standard","hentry","category-test-1","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704930649},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/35401","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=35401"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/35401\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=35401"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=35401"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=35401"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}