Pradhan Mantri Jan Dhan Yojana

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Launch of the program on August 28, 2014

Pradhan Mantri Jan Dhan Yojana ( PMJDY , Hindi प्रधानमंत्री जन धन योजना ), "Prime Minister's Plan for People's Money ", is a multi-year program launched by the Narendra Modi government in India on August 28, 2014 . The aim of the program is to promote financial inclusion , or in other words, to encourage the population to participate in cashless payments.

background

Share of cash in gross domestic product according to data from the World Bank (2015)

At the time the program was introduced, the Indian economy was relatively heavily influenced by the cash economy. Wages were generally paid in cash and bills paid in cash. Significant parts of the population did not have a bank account and had never made a single financial transaction through a bank in their life. According to government data, around 40 percent of all households with 60 percent of the population had no access to banking.

This fact is seen as a significant obstacle to growth in India. On the one hand, an efficient and modern economy is inconceivable without cashless money transfer; on the other hand, a large part of government services must be transferred to the recipient in cash, which entails considerable costs. Thirdly, large parts of the economy escape state control, since the money that has flowed in cannot be traced back to state control authorities, which leaves room for the black and gray economy. People without bank access are dependent on the “informal lending system”, which more often offers loans on poorer terms.

The declared aim of the program was to give the population general access to banks. Every household should therefore have at least one bank account. The establishment of bank accounts should also create the conditions for being able to offer small loans to the population and to integrate them into the state social security system.

Start of the program, conditions

Thank you address of the Prime Minister after the program starts
Treasury Secretary Arun Jaitley speaking on August 28, 2014

The PMJDY program officially began on August 28, 2014, two months after the new Modi government was sworn in after the 2014 general election . In addition to Prime Minister Modi, the chief responsible person was Finance Minister Arun Jaitley . Educational events were held across the country and in all states.

To open an account, you had to present an official personal document (passport, driver's license, official card with tax number, official card for entry in the electoral roll, etc.). No deposit was necessary. However, account holders who also wanted to receive personal checks were required to show certain minimum deposits. Account holders had the option of purchasing a simple RuPay credit card. The RuPay credit card system was introduced in 2012 at the instigation of the Reserve Bank of India in order to break through the previously dominant duopoly between the two credit card companies Visa and Mastercard, which was very expensive for India .

The terms of the PMJDY program were as follows:

  • Free account management with simple transfer options throughout India
  • no minimum deposit
  • Interest on any deposits
  • Free accident insurance over 100,000 (1 lakh ) Rs. (1000 rupees ≈ 12 €)
  • free life insurance (Rs 30,000 in the event of death) for the account holder
  • Recipients of pensions or other state benefits receive these transferred directly to the account
  • After 6 months of correct account management, an overdraft credit of Rs. 5000 per household is possible, which should preferably be given to women
  • Simplified access to government insurance and pension offers for account holders

Persons without the above valid identity documents were given the opportunity, so-called "small accounts" ( small accounts ) to open with reduced functionality.

Planning phases and program duration

When introduced, the PMJDY program was designed in two phases and a total duration of 4 years.

First phase (August 15, 2014 to August 14, 2015)
  • Creation of universal bank access for the entire population
  • Provision of bank accounts with an overdraft facility of 5000 rupees after 6 months of use and a simple RuPay credit card, combined with accident insurance of 100,000 rupees (1 lakh ) and a RuPay Kisan Card
  • Programs to train the population in dealing with banking ( Financial Literacy Program )
Second phase (August 15, 2015 to August 15, 2018)
  • Establishment of a state fund to compensate for deficits caused by unpaid overdrafts
  • Further expansion of the insurance system for bank account holders
  • Expansion of the state pension system for account holders, incentives for account holders to participate in state pension insurance schemes and to pay into them ( Swavalamban Yojana program)
  • Expansion of the program also in regions with poor transport connections for disadvantaged, isolated population groups (e.g. Scheduled Tribes )

After the program ended, Treasury Secretary Arun Jaitley stated on September 5, 2018 that PMJDY would continue indefinitely until the goals were met.

Numerical development

New PMJDY bank account holders in Mizoram on November 14, 2014

The figures were available at different times on the website of the PMJDY program. The figures were based on the banks' self-reports. A distinction was made between state banks, Gramin banks ( regional rural banks , small state banks that were set up in the 1970s to facilitate rural lending), and private banks.

Development of the PMJDY program
Bank (type) Account openings Deposits
(billion rupees)
(₹ 1 billion = € 12-15 million) 		RuPay
credit cards
(in millions)
all in all in rural
areas 		in urban /
metropolitan areas
End of 2014 (as of December 31, 2014)
Public banking sector 83.091.063 45.119.636 37,971,427 65.8 73.1
Gramin banks 18,509,871 15,717,860 2,792,011 12.8 9.3
Private banking sector 2,881,535 1,511,376 1,370,159 5.0 2.2
All in all 104,482,469 62,348,872 42.133.597 83.5 84.6
End of 2015 (as of December 30, 2015)
Public banking sector 155.374.164 86.052.376 69,321,788 230.3 136.1
Gramin banks 35,654,295 30,585,647 5,068,648 50.3 25.7
Private banking sector 7,356,074 4,401,890 2,954,184 11.7 6.6
All in all 198.384.533 121,039,913 77.344.620 292.3 168.5
End of 2016 (as of December 28, 2016)
Public banking sector 209.055.345 116.090.272 92,965,073 552.5 165.8
Gramin banks 44,433,417 38.332.809 6.100.608 131.7 33.0
Private banking sector 8,530,696 5,186,801 3,343,895 26.2 8.2
All in all 262.019.458 159,609,882 102,409,576 710.4 207.0
End of 2017 (as of December 27, 2017)
Public banking sector 248.502.508 133.261.941 115.240.567 570.9 186.6
Gramin banks 49,573,287 41,908,385 7,664,902 122.7 36.4
Private banking sector 9,875,467 5,986,433 3,889,034 21.4 9.2
All in all 307.951.262 181.156.759 126.794.503 715.0 232.3
End of 2018 (as of December 26, 2018)
Public banking sector 270,543,940 146.229.322 124.314.618 690.8 221.0
Gramin banks 55,534,160 46,723,565 8,810,595 148.4 37.9
Private banking sector 10,490,227 6,213,441 4,276,786 24.0 9.8
All in all 336.568.327 199.166.328 137.401.999 863.2 268.7

Effects and judgments

Hardly anyone disputed the usefulness of digitizing payment transactions and greater participation of the population in banking. However, some critics characterized the program as inefficient and expensive. With the creation of millions of new bank accounts, the banks were burdened with considerable additional costs. Bank accounts have also been opened to a considerable extent by people who already had an account and only wanted to enjoy the benefits of the PMJDY program.

Non-governmental analyzes, consistent with official statistics, showed that the proportion of people with bank accounts in India had increased significantly (from around 53% in 2014 to around 80% in 2018). However, many of the newly established bank accounts remained completely unused. About half of the accounts had not made a single deposit or withdrawal in 2018. Compared to other countries (especially sub-Saharan Africa, especially Kenya ) , the possibility of payment transactions via mobile phone is still little used in India . There is still a long way to go before the majority of the population is genuinely financially included.

Web links

Commons : Pradhan Mantri Jan Dhan Yojana  - Collection of images, videos and audio files

Individual evidence

  1. ↑ worldbank.org (ed.): South Asia Economic Focus, Spring 2017: Globalization Backlash. Washington, DC 2017, ISBN 978-1-4648-1095-4 , pp. 10 , doi : 10.1596 / 978-1-4648-1095-4 (English, online ).
  2. ^ A b Nazim Khan: Critics attack 'wasteful, ineffective' PM Jan Dhan Yojana. moneycontrol.com, September 3, 2014, accessed February 21, 2019 .
  3. ↑ a b c Pradhan Mantri Jan Dhan Yojana (PMJDY). Indian Ministry of Finance, accessed January 24, 2019 .
  4. ↑ RuPay Card - All information about RuPay and RuPay Card. bankingawareness.com, accessed January 24, 2019 .
  5. ↑ Prime Minister to Launch Pradhan Mantri Jan Dhan Yojana Tomorrow: To Dedicate Mobile Banking Facility on Basic Mobile Phones to the Nation. Government of India Press Information Office, August 27, 2014, accessed January 24, 2019 .
  6. ↑ Government makes Pradhan Mantri Dhan Yojana January open-ended scheme. The Times of India, September 5, 2018, accessed February 18, 2019 .
  7. ↑ Pradhan Mantri Jan Dhan Yojana (PMJDY). Retrieved on February 19, 2019 (English, archive).
  8. ^ Rohit Azad, Dipa Sinha: The Jan-Dhan Yojana, four years later. The Hindu, May 29, 2018, accessed February 21, 2019 .
  9. ↑ Tish Sanghera: 80% of Indians now have a bank account. So why is financial inclusion low? The Business Standard, May 17, 2018, accessed February 21, 2019 .