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THE CONTEXT: The Pradhan Mantri Jan Dhan Yojana (PMJDY) has revolutionized financial inclusion in India, significantly reducing inequalities and empowering marginalized communities. As we look toward the future, enhancing and expanding such initiatives can further drive socio-economic change and distributive justice.
THE ACHIEVEMENTS:
- Massive Account Opening and Reach: Since its inception in 2014, PMJDY has opened over 53 crore accounts, marking a 3.6-fold increase from March 2015. This has substantially increased the formal financial inclusion of the population, with deposits reaching Rs 2.31 lakh crore.
- Focus on Rural and Women Beneficiaries: A significant portion of PMJDY accounts are held by women (55.6%), and 66.6% of accounts are in rural and semi-urban areas. This focus has played a crucial role in empowering underserved communities and reducing the gender gap in financial services.
- Boost to Digital Economy: The issuance of 36.14 crore RuPay cards under PMJDY has fueled the growth of digital transactions in India, contributing to a surge in digital payments from 2,338 crore transactions in FY19 to 16,443 crores in FY24.
- Reduction in Crime Rates and Consumption of Intoxicants: The scheme has had social implications, such as a reduction in crime rates in states with higher account balances and a statistically significant drop in the consumption of intoxicants like alcohol and tobacco in states where more PMJDY accounts were opened.
- Plugging Leakages and Efficient Transfers: Over the last decade, Rs 38.49 lakh crore has been transferred via Direct Benefit Transfer (DBT), with Rs 3.48 lakh crore of leakages plugged. This has enhanced the efficiency and transparency of government welfare schemes.
- Global Recognition and Financial Empowerment: PMJDY has received international recognition as one of the global financial inclusion initiatives. It has empowered individuals economically by facilitating access to financial services, credit, insurance, and pension schemes, thereby promoting equitable growth.
THE ISSUES:
- Non-Supportive Attitude of Bank Employees: Many beneficiaries have reported a lack of support and awareness from bank employees regarding PMJDY. This includes a non-supportive attitude, disinclination towards work, and a lack of regular training for bank employees to assist account holders effectively.
- Inactive and Zero-Balance Accounts: A significant number of accounts remain inactive, with around 8.4% having zero balances. This indicates that while accounts are being opened, they are not being used actively, undermining the scheme’s objectives.
- Connectivity and Technological Issues: Poor connectivity, especially in rural areas, poses a major hurdle. This includes inadequate digital infrastructure and bandwidth issues, which affect the proper functioning and accessibility of banking services.
- Lack of Financial Literacy: There is a need for enhanced financial literacy among stakeholders to ensure that beneficiaries can fully utilize the financial services offered by PMJDY. Many account holders are not aware of the benefits and facilities available, such as the overdraft facility and insurance coverage.
- Procedural Challenges: Many potential beneficiaries face challenges in understanding the procedures for opening accounts and the documentation required. This lack of clarity can deter people from accessing the scheme’s benefits.
- Limited Access to Banking Facilities: In rural areas, there is often a shortage of ATMs and banking facilities, limiting account holders’ access. This issue is exacerbated by the limited availability of RuPay card usage infrastructure in these regions.
THE WAY FORWARD:
- Enhanced Financial Literacy Programs: Strengthen financial literacy initiatives to educate PMJDY account holders about the benefits and usage of financial services. Collaborate with educational institutions, NGOs, and economic bodies to offer comprehensive financial education programs.
- Promotion of Digital Payments: Provide incentives for adopting digital payment methods, encouraging the use of RuPay debit cards and mobile banking. Focus on expanding digital infrastructure to enable seamless transactions, especially in rural and remote areas.
- Expansion of Credit Facilities: Increase access to credit for micro, small, and medium enterprises (MSMEs) and entrepreneurs through PMJDY accounts. Develop tailored credit solutions in collaboration with financial institutions to prevent over-indebtedness and ensure sustainable financial growth.
- Innovation in Financial Products: Introduce micro-insurance, micro-pension, and micro-credit schemes to cater to the diverse needs of account holders. Partner with fintech companies to create accessible and innovative financial products that meet the specific needs of low-income groups.
- Improvement of Banking Infrastructure: Expand banking services in underserved areas by establishing more banking correspondents and mobile banking facilities to ensure last-mile access. Address infrastructural challenges to maintain active and functional accounts, reducing account dormancy.
- Monitoring and Evaluation: Implement robust monitoring mechanisms to assess PMJDY’s impact and identify areas for improvement regularly. Conduct surveys and studies to understand account holders’ evolving needs and adapt strategies accordingly.
- Inclusive Approach: Design financial solutions that address the specific needs of marginalized groups, including women and persons with disabilities. Ensure that financial products and services are inclusive and empower all segments of society, particularly those at the bottom of the pyramid.
- Partnerships and Collaboration: Foster collaborations with various stakeholders, including government agencies, private sector players, and non-profit organizations, to leverage resources and expertise. Build strategic partnerships to ensure the sustainable implementation of financial inclusion initiatives.
THE CONCLUSION:
By adopting innovative strategies and fostering inclusive growth, PMJDY 2.0 can deepen its impact, ensuring that financial empowerment reaches every citizen. This will strengthen livelihoods and pave the way for a more equitable and prosperous society.
UPSC PAST YEAR QUESTION:
Q.1 Is inclusive growth possible under a market economy? State the significance of financial inclusion in achieving economic growth in India. 2022
Q.2 It is argued that the inclusive growth strategy is intended to meet the objectives of inclusiveness and sustainability. Comment on this statement. 2019
Q.3 What are the salient features of ‘inclusive growth’? Has India been experiencing such a growth process? Analyze and suggest measures for inclusive growth. 2017
Q.4 Pradhan Mantri Jan-Dhan Yojana (PMJDY) is necessary for bringing the unbanked to the institutional finance fold. Do you agree with this for the financial inclusion of the poorer section of Indian society? Give arguments to justify your opinion. 2016
MAINS PRACTICE QUESTION:
Q.1 Discuss the impact of the Pradhan Mantri Jan Dhan Yojana (PMJDY) on financial inclusion in India. Evaluate the potential strategies for PMJDY 2.0 to enhance socio-economic change and ensure distributive justice at the grassroots level.
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