SOCIAL IMPACT

ASSESSMENT OF
PRADHANMANTRI
JAN DHAN YOJANA

Submitted By:
Yash Garg
Abhiraj Dutta
Shyamal Kesarwani
Suraj Gulati
Abhi Shankar
Rajat Saini
 Introduction
Jan Dhan Yojana is a new scheme implemented by the Government of India under which every Indian
family is expected to be enrolled in a bank for opening a zero-balance account. This scheme not only
provides the families to have bank accounts but it also offers different benefits to the poor families
those who open an account. This new scheme has been regarded as the first revolutionary step to
mitigate financial exclusion through rapid financial inclusion in the country.
In the current state of financial untouchability, the scheme is an oasis on providing economic benefits
as well as providing solace to poverty-stricken people spread throughout the country. As each family
of the country trigger the economic cycle of the country, they should have the privilege to have a bank
account and get connected to the vehicle of the economy. Indeed, when everyone will be connected to
the economic cycle of the economy, it will not only move rapidly but usher an era of growth and
prosperity. It is a matter of proud record that as on date more than more than 24 crores Jan Dhan
accounts have been opened by the commercial banks in India.
Benefits under the Scheme:
The five important benefits for the account holders are enumerated as follows:
i) With a new bank account each family will be getting a Ru Pay debit card that they can use to
withdraw money from the account;
ii) The newly opened account will be a zero-balance account and thus the account holder will
not be required to maintain any minimum balance in the account;
iii) Each account holder who enrolled under this scheme by opening an account will be getting a
life cover of Rupees 30,000/-;
iv) Along with the life cover, the account holder will get an insurance policy wherein he/she will
get an accidental cover of rupees one lakh;
v) If an account holder maintains the bank account and transact actively, then the account
holder will be given an overdraft limit of rupees five thousand only.
Special Benefits under PMJDY Scheme

 Insurance Benefits

The account holders under this scheme will get an accidental insurance cover of Rs 1 lakh
and a life cover of Rs 30,000 – payment on the death of the beneficiary (subject to
conditions).

 Loan Benefits

The account holders under this scheme can avail an overdraft facility upto Rs 5,000. This is
available against one account per household. The quantum of the loan may look small but
definitely is a boon to those below the poverty line and would enable them to reinvest this in
more profitable avenues.

 Mobile Banking Facility:

Enabling carrying out transactions through a mobile phone facilitates such account holders in
checking of balance and also transferring funds with ease across India.
The other benefits being:

 The account holders would be eligible for interest on their deposits

  They are not mandated to have a minimum balance in the account
 The scheme allows Direct Benefit Transfer for beneficiaries of Government Schemes.

The differences between the earlier programme and PMJDY are as under:
 The earlier programme focused on providing banking services in 'villages' with population
of 2,000 or more, whereas PMJDY wants to cover 'individual households' with bank
accounts.
 Apart from the mega account opening camps held on the day of the PMJDY launch, banks
to hold 'special campaign' from 8 am to 8 pm on every Saturday at each rural and semi-urban
branch in a district in coordination with the District Authorities for opening of accounts.
 PMJDY focuses 'equally' on rural and urban areas as against very limited focus on rural
areas in the earlier programmes.
 PMJDY pursues 'digital' financial inclusion with special emphasis on 'monitoring' by a
mission headed by the Finance Minister.
 A platform has been built by the National Payment Corporation of India that connects all
the banks and all telephone network operators in the country.
 PMJDY accords top priority to Financial Literacy campaign.

SOCIAL IMPACT ASSESSMENT PROCESS

 1. Analyse Project context:

Rural financing is not sufficient by itself as it faces issues like high loan default
incidence, high transaction costs, absence of collateral and lack of consumption
related financial products. In the last two decades microfinance emphasizes upon
lending to women who have ensured to a great extent that both household
consumption and capital needs for microenterprises can be taken care of by lending to
Joint Liability Groups. Moreover, problems like adverse selection, moral hazard, and
monitoring and legal enforcement are abated to a great extent. Also, it will provide a
paradigm shift in development strategy by making it more inclusive and people
centric. Rangarajan Committee (2008) recommended recognizing NBFCs as
microfinance institutions (MFIs) and bringing greater legitimacy, accountability and
transparency in the working of MFIs. In rural India, group financing has been in
vogue as members come together from similar occupational backgrounds, common
religious, cultural and social traits to form Self Help Groups (SHGs). NGOs have
been serving as the promotional agencies for SHGs as they assist the poor with group
formation and in setting common goals for them. However, regional differences in
performance and internal health of SHGs are a major point of concern. Rangarajan
Committee (2008) recommended increasing the outreach of SHGs, providing them a
legal status, encouraging SHGs to offer wider variety of products and making
Federations of SHGs.

2. Identify Stakeholders:

The SWOT analysis of the scheme is discussed for better understanding.

 Strength:
Because of its unique approach, PMJDY strength can be viewed from its defined
objectives and goals.
 Under the scheme, account holders will be provided zero-balance bank account with
any bank, either public or private, with RuPay debit card, in addition to accidental
insurance cover of Rs 1 lakh;
 Those who had opened accounts by January 26, 2015 over and above Rs1 lakh
accident cover will also be given life insurance cover of Rs 30,000;
 After six months of opening the basic savings bank account, holders can avail Rs
5,000 overdraft from the bank;
 With the introduction of new technology by National Payments Corporation of India
(NPCI), a person can transfer funds, check balance through a normal phone which
was earlier limited only to smart phones;
 Mobile banking for the poor would be available through National Unified USSD
Platform (NUUP) for which all banks and mobile companies have come together;
 Those banks that are taking part in this scheme will be operating special camps where
one can approach and get a new bank account registered. Usually, these camps run
from 8 a.m.to 8 p.m.;
 The special online portal is being launched to study the progress of the scheme that is
being implemented on a larger scale;
 Mapping of each district into Sub Service Area (SSA) catering to 1000-1500
households in a manner that every habitation would access to banking services within
a reasonable distance by 14th August, 2015. Expansion of bank branches and ATM
 network according to SSA identification programme and coverage of population
through Business Correspondent called Bank Mitra has been taken up;
 Account can be opened with simple documentation. If Aadhaar card number is
available then no other document is required. Letter issued also by a gazetted 36
officer, with a duly attested photograph of the person is sufficient enough to open
the account;

 Weakness:
PMJDY scheme has few limitations that impede its progress toward achievement of
pre-defined goals.
 As PMJDY is a time bound financial inclusion plan financial literacy is a perquisite
for effective financial inclusion. Inadequate number of Financial Literacy Centres
(FLCs) in the country proves to be a limitation;
 This mega financial inclusion plan involves expanding bank branch network, ATM
centres and Banking Correspondents outlets as well as their integrated links for which
prevailing infrastructure is not sufficient;
 There are a number of stakeholders involved in implementation of this financial
inclusion mission such as the Central Government and its multiple departments, 37
RBI, NABARD, UIDAI, IBA, NPCI, SLBC, LDM, State governments, District
Administration and Local bodies etc. are the institutions associated with the mission.
Successful implementation of this mission depends on co-ordination, clarity of role
performance and non-clashing of mutual interests of multiple institutions are not
clearly stated in the PMJDY scheme;
 Today, nearly all the banking transactions are carried through information and
communication technology (ICT). The bank branches and BCs must have
uninterrupted broad band connectivity and electric supply in all the areas, whereas
most of the survey indicate BCs have lower connectivity through ICT. Moreover,
electric supply is erratic and unreliable in most of the rural areas;
 Brand awareness and sensitization of general public is necessary to communicate
the essentials of this scheme to the public;
 Customers to be made aware that Rs. 5000/- is an overdraft facility subject to
satisfactory operation of their accounts and is required to be repaid in order to get
renewal for fresh overdraft facility. Indeed, the weakness of treating overdraft as a
free grant is a major jolt to the progress of the scheme;
 There is lack of clarity in public domain, whether the people already having bank
account have to open an account under PMJDY for getting benefits of the scheme. It
will result into multiplication of accounts, wastage of resources for banks and finally
leaving many accounts dormant;
 Presently, 65% bank accounts in PMJDY are with zero balance. The account
holders think that they are eligible for all benefits under the PMJDY merely on the
basis of having bank account and overdraft facility is a free grant of fund to them.
This misunderstanding must be rooted out from the mind of account holders and basic
features with their crucial factors of the scheme should be communicated truthfully to
the participants in their understandable language otherwise the scheme shall lead to
failure in public domain;
 Overdraft facility needs to be properly regulated, as the same is the discretionary of
the concerned banks. Otherwise, many banks may decline to extend the overdraft
facility thereby defeating the very purpose of this scheme;
  Business correspondents, if made to accomplish the objective may misuse the
authority and thereby making the life of people miserable living below poverty line;
 KYC norm is not insisted seriously under this program therefore duplication is
unavoidable;

 Opportunity:
PMJDY provides both internal and external forces in the operating environment, for the
scheme to run more effectively.
 Reserve Bank of India being the apex bank of the Banking System has set in a roadmap for
the financial inclusion being effectively implemented by the banking system;
 It is an innovative and much-needed step in the right direction that will address the biggest
national challenge of “eradication of poverty” through financial inclusion;
 The scheme is expected to boost insurance penetration in the country thereby installing a
safety net to the poor ;
 This is an important step towards converting the country into a cashless and digital
economy at the earliest;
 By paying benefits directly into bank accounts, the scheme could able to cut unnecessary
waste and corruption;
 A large number of bank branches operating through the country can be effectively used for
financial inclusion;
 This will provide more employment to the people of India as Government needs a large
number of bank professional and Bank Mitra to reach the unbanked people of more than 6
lakhs villages of India;
 It will be a great milestone achieved after linking with Aadhaar card to direct financial
transactions, subsidies transfer and lot more in future;
 When these financially excluded people start depositing their small savings with the bank
for interest and safety and those small savings have become such a large amount that when
put to investment will generate greater employment opportunities, which in return generate
income which can produce demand and this will encourage further production and
employment generation thus boosting saving and investment. Hence, this effort of the
government will bring movement to the vicious cycle of growth and bring favourable
changes in the economy in the long run;
 The scheme can be linked to Swachta Abhiyan for construction of toilets in the rural area
through finance provided under PMJDY;
 This scheme can complement the previous schemes under financial inclusion such as micro
financing through SHG for working towards faster development;
 It could help to build entrepreneurship qualities through promotion of small businesses in
the rural area;

 Threats:
Some unfavourable situation in the environment can impedes the implementation strategies
towards achievement of its goals.
 From the accident insurance given under the PMJDY scheme, initiative should be taken for
providing life insurance coverages; otherwise alienation towards PMJDY will increase;
 As per the campaign strategies, the task of credit counselling and Financial Literacy
appears to be not going hand in hand together;
 ATM network in rural India is quite less in numbers hence people are less aware of using
ATM‟s, thereby defeating the purpose of larger number of transactions;
  Government can easily encourage people to open new accounts but the biggest challenge
is increasing transactions in those accounts;
 There is no clarity about recovery of overdraft amount and the associated cost from the
account holders;
 There is an urgency to organize PMJDY effectively as all other development activities will
be hindered without successful implementation of this single scheme;
 There is big possibility of opening account under PMJDY from those who have account
already. As there is no check on the new account opening, duplication will lead to trouble in
future;
 Implementation of debit card still face slow roll out and there are logistic issues and
possibility of misuse by third parties;
 There is no clarity whether already existing account holders would get 1 lakh accidental
insurance coverage;
 It is also not clear who is going to bear the bill of insurance premium and the associated
costs to keep the accounts running;
 It appears, the existing saving accounts holders without RuPay card cannot get other
benefits;
 Budgetary provisions have not been made by the Government to provide incentives,
therefore the financial position of banks may be in trouble;

Weakness: PMJDY scheme has few limitations that impede its progress toward achievement of pre-
defined goals.

 As PMJDY is a time bound financial inclusion plan financial literacy is a perquisite for effective
financial inclusion. Inadequate number of Financial Literacy Centres (FLCs) in the country proves to
be a limitation;

 This mega financial inclusion plan involves expanding bank branch network, ATM centres and
Banking Correspondents outlets as well as their integrated links for which prevailing infrastructure is
not sufficient;

 There are a number of stakeholders involved in implementation of this financial inclusion mission
such as the Central Government and its multiple departments, RBI, NABARD, UIDAI, IBA, NPCI, SLBC,
LDM, State governments, District Administration and Local bodies etc. are the institutions associated
with the mission. Successful implementation of this mission depends on co-ordination, clarity of role
performance and non-clashing of mutual interests of multiple institutions are not clearly stated in
the PMJDY scheme;

 Today, nearly all the banking transactions are carried through information and communication
technology (ICT). The bank branches and BCs must have uninterrupted broad band connectivity and
electric supply in all the areas, whereas most of the survey indicate BCs have lower connectivity
through ICT. Moreover, electric supply is erratic and unreliable in most of the rural areas;

 Brand awareness and sensitization of general public is necessary to communicate the essentials of
this scheme to the public;

 Customers to be made aware that Rs. 5000/- is an overdraft facility subject to satisfactory
operation of their accounts and is required to be repaid in order to get renewal for fresh overdraft
facility. Indeed, the weakness of treating overdraft as a free grant is a major jolt to the progress of
the scheme;

 There is lack of clarity in public domain, whether the people already having bank account have to
open an account under PMJDY for getting benefits of the scheme. It will result into multiplication of
accounts, wastage of resources for banks and finally leaving many accounts dormant;