Jan Dhan Yojana: Average deposit balance doubles despite rural distress, economic slowdown

The average deposit balance under Prime Minister Jan Dhan Yojana (PMJDY) has more than doubled since the launch of the scheme. The five-year-old scheme, a pet project of the prime minister Narendra Modi, has seen a gradual increase in the average deposit per account from Rs 1,000 in March 2015 to Rs 2,853 in October 2019. There was a consistent rise in the account balance despite a slowdown in rural consumption amid falling rural income. The subdued economic activity has also failed to cause any negative impact on PMJDY accounts.

So far the banks have opened 37.34 crore accounts with outstanding deposits of Rs 1.06 lakh crore. The deposit base of Rs 1 lakh crore may look paltry in front of total deposits of Rs 120 lakh crore in the banking industry, but the total number of beneficiaries at 37.34 crore is huge. It shows the scale and reach of the PMJDY. Concerns abounded earlier on the need to have such a large number of accounts as it involved significant maintenance cost, but the government kept on adding new features to make them attractive for masses.

Currently, a PMJDY offers a RuPay debit card with an overdraft facility. There is also an inbuilt accident insurance cover of Rs 2 lakh in the RuPay card. The overdraft facility under the account is Rs 10,000.

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The PMJDY accounts are coming handy for Direct Benefit Transfer (DBT), helping the government plug subsidy leakages by eliminating the middlemen, agents. Over 7.5 crore accounts are already receiving DBT under various schemes. Many suggest that the facility to keep a zero balance account is also popular among people to open an account. The demonetisation exercise, though failed in achieving larger objectives, has helped in opening accounts in semi-urban and rural areas.

Many still question the impact of the PMJDY. The facility to allow people open accounts without proper documentation raises concerns and rightfully so. The RBI provides a relaxed KYC process where people without proof can provide a self-attested photo and thumb impression to open an account. These accounts are allowed a maximum deposit of Rs 1 lakh and withdrawal facility of Rs 10,000 per month.

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There are also dormant accounts in the system. The inoperative accounts lasting for a year are about 15 per cent. A similar percentage comprises zero balance accounts.

The PMJDY is clearly playing its part in achieving the financial inclusion objective. The credit history of depositors is getting built. These depositors will soon become eligible to get loans from banks. The scheme is also supported by other policy measures such as the institutional framework of payments banks and small finance banks. These differentiated banks are given licences to achieve the financial inclusion objective. Similarly, the RBI has also given licence to erstwhile micro-finance institution Bandhan Bank as a full-scale bank. Similarly, hundreds of fintech lenders are reaching out to underserved and unbanked customers to support them with funding.