Defying sceptics who warned that it would turn out to be a millstone around banks’ necks, the NDA’s Pradhan Mantri Jan Dhan Yojana (PMJDY) seems to be delivering well on its financial inclusion objectives without placing undue burden on bank bottomlines. The aggregate deposits in the PMJDY accounts are currently nudging ₹1 lakh crore, having grown ten-fold from the ₹10,500 crore in the first phase of the scheme in January 2015. After witnessing a sharp spike and then a moderation in the three months immediately following the note ban in 2016, deposit flows into JDY has settled down to a brisk 25 per cent growth rate in the last two financial years. Though they still make up less than 1 per cent of banks’ deposit base, their sustained growth in a year when deposit flows were hard to come by, has helped shore up banks’ CASA (Current Account Savings Accounts) balances. Key banks that BusinessLine spoke to also noted that with the average balance in these accounts topping ₹2,000, servicing costs are no longer a big worry.

The PMJDY has delivered financial inclusion on three counts. One, it has contributed to financialisation of savings by giving lower income households access to a safe investment product. In the last four years, deposits in these accounts have expanded ten-fold even as the number of account holders is up only three-fold, showing that existing depositors in JDY regularly top up their balances. Two, with 13.5 crore beneficiaries enrolling for the low-cost accident insurance cover and 5.5 crore for the life cover, the account is giving disadvantaged folks a look-in to other financial products. Three, with 27.7 crore account holders now armed with Rupay debit cards, their transition to electronic payments has gotten a leg-up too. But now that JDY deposit flows are shoring up banks’ CASA, the Centre must nudge them to offer much-needed loan products to these account holders. Allowing them to build up a credit and transaction history in the banking system is critical to wean them away from the grip of usurious money lenders who extract a heavy price on their finances when emergencies strike. Using a dashboard approach to track the value and number of overdrafts sanctioned on the PMJDY portal would be a good way to achieve this.

The Centre and the RBI also need to make sure that these first-time adopters are treated well at bank branches, know the grievance redressal mechanisms and are aware of, and protected from, the consequences of fraud or misuse of their accounts. The sharp spike in the JDY account balances during the note ban months was a red flag on this score. Rather than persisting with account opening or deposit targets for banks on JDY, regulators must now ratchet up their education efforts to make sure that JDY holders are aware of their rights and don’t fall prey to benami holders or money-launderers seeking to exploit their banking access.

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