The truth about Jan Dhan Yojana: Yet another jumla

Prime Minister Narendra Modi launched the Jan Dhan Yojana in 2014 as a financial inclusion program, enabling all to get access to banking facilities. However, this scheme is nothing but only a renamed version of the UPA government’s Basic Savings Bank Deposit Account (BSBDA) scheme.

It was the UPA government that the sowed the idea of financial inclusion. The Reserve Bank of India (RBI) introduced the Basic Savings Bank Deposit Account (BSBDA) which was also called the ‘No Frills Account’ or ‘Zero Balance Account’.

Until May 2014, 25 crore BSBD Accounts had been opened and the average citizen began to enjoy the advantages of modern banking.

Simultaneously, the Aadhaar programme was rolled out and 65 crore Aadhaar numbers were issued by May 2014.

BSBDA and Aadhaar were historic achievements. They were possible because of the following steps taken earlier to build the financial architecture

* 2008: National Payments Corporation of India (NPCI) established.

* 2009: Universal Identification Authority of India (UIDAI) established.

* 2010: NPCI launched Immediate Payment System (IMPS).

* 2012: RBI notified Basic Savings Bank Deposit Account.

* 2012: NPCI launched RuPay card.

Rural branches of banks were opened and rural Banking Correspondents (BC) were appointed. The following table compares the record of the UPA and of the NDA:

Rural Branches           Rural BCs              Total

2010-14 (UPA)                    12,748                    3,03,504             3,16,252

2014-18 (NDA)                     4,679                     1,77,639             1,82,318

Coming back to Jan Dhan Yojan, the NDA government conveniently ignored the 25 crore accounts that were opened before 2014. Not just renaming, they also ruined the entire impact the earlier scheme and proved that their scheme is nothing but a jumla.

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Let’s have a look at some of the loopholes that this ‘jumla’ scheme has:

• By December 2016, 24 per cent of the accounts were zero balance accounts. No data is available for the subsequent period. Of the remaining accounts, 15-20 per cent have a ‘balance’ only because bank managers were encouraged to deposit Re 1 in the account!

• According to a Ministry of Finance answer, 6.1 crore Jan Dhan accounts — or one out of five — are ‘inactive’. According to the World Bank’s Global Findex Database 2017, as many as 48 per cent of bank accounts in India are ‘inactive’’, twice the average of 25 per cent for developing economies.

• Also, 33 per cent of accounts were opened by persons who already had an account in their names. It makes difficult for us to understand how is the objective of financial inclusion achieved by such a thing.

• The credit-deposit ratio (ratio of how much a bank lends out of the deposits it has mobilised) of the rural population had reached 67 in March 2017. However, after the introduction of the Jan Dhan Yojana, this ration declined to 60 in 2017. This makes it clear that the increase in the number of accounts has not translated into greater flow of credit to the rural population.

• It is not hidden that the Jan Dhan accounts were used to launder money post demonetisation. A whopping sum of Rs. 42,187 crore was deposited in Jan Dhan accounts between November 08, 2016 and December 30, 2016. Initially, the Finance Minister threatened legal action (12 November 2016), but the Finance Secretary ruled out any investigation on the grounds it would be a “time consuming process.”

• Jan Dhan accounts are permitted only 4 withdrawals a month, with the fifth withdrawal inviting a penalty. Doesn’t this prevent people from accessing their own savings?

• It had also come to light that banks have, without the consent of the account holder, converted Jan Dhan accounts into regular savings accounts and are charging exorbitant fees for any failure to maintain a minimum balance. Isn’t that injustice with the people, especially the one belonging to the rural class, who can hardly afford such expenses?
• Opening a Jan Dhan account was supposed to be free of cost, but one in five persons had to pay a middleman to open one, according to a September 2017 World Bank research paper. Of those who opened an account, 53 per cent were required to pay a minimum deposit even though no minimum deposit has been stipulated.

• The government boasted about the life and accident insurance benefits available with a Jan Dhan account but failed to mention that the Rs 30,000 life insurance feature applies only to those who opened a Jan Dhan account between August15, 2014 and January 31, 2015. This incentive was introduced only to generate record account openings rather than offering a real benefit. As reported by News Click, just 4,543 life insurance claims worth Rs 13.62 crore and 2,340 accident claims worth Rs 23.40 crore have been paid till January 2018.

All these points show how much “financial inclusion” has really happened and that this scheme was nothing but a jumla, aimed at mobilising crores of rupees from poor people and enabling the banks to use the same for lending and investment. It has no where helped the poor, in fact, has exploited them.