PMJDY and Inclusion To Banking Services-Evidence From the Ground

In August 2014, the Pradhan Mantri Jan Dhan Yojana (or simply the PMJDY) was unveiled with the ambitious target of opening 150 Million bank accounts in India and liberating the poor in India from the vicious cycle of poverty (or “vish-chakra se gareebon ki aazaadi ka parv”).

Under the PMJDY, account holders were promised a RuPay debit card, insurance coverage of Rs 100,000 in the event of an accident and life insurance coverage of an additional Rs. 30,000. Apart from this, account holders were promised an overdraft facility of Rs.5,000, but this was to be offered once the bank was satisfied of the usage of the account. It is also interesting to know that the scheme was recognized by the Guinness World Records for the most number of accounts (18,096,130) opened in single a week ie. 23 to 29 August, 2014.

Efforts of the government were also recognized by IFC in their Global Findex Report, 2017, that had reported that between 2014 and 2017 account ownership in India had doubled since 2011 to 80 percent. The report also mentioned that account dormancy stands at 48%, ie. only 42% of bank accounts in India have seen any activity (ie atleast a deposit or withdrawal) in the last year. Account dormancy in India is the highest in the world and more than twice the average for developing countries (which stands at 25%). It is pertinent to note that in 2011, prior to the launch of the PMJDY scheme, 33% of the Indian population had a bank account.

The Study
To understand impact of the PMJDY amongst working women in an urban Indian village, the author conducted a study amongst 110 women who earned between Rs. 5,000 to Rs. 15,000 ie USD 70 to USD 210 in Nathupur, Haryana. The author followed an approach of informal questioning on the usage of their PMJDY accounts, usage of debit cards, bank mitra services, insurance and credit facilities. Mirroring the findings of the Global Findex Report, 2017, the author found the following results of the study.

Lack of Usage Because of the Lack of Funds
Nearly 80% of the women studied did not use their PMJDY accounts after having opened them. They cited the lack of savings as the primary reason for not opening bank accounts. Most of the respondents studied were aware of the importance of saving and the procedure to withdraw and deposit money, but did not find any use of their accounts because they simply lacked the disposable income after meeting their basic consumptive needs.

Lack of Usage Because of the Lack of Awareness
A vast majority of the women studied had not used their bank accounts because they were not aware that accounts opened at a branch cannot be used in another location. They had not received debit cards for their accounts and they were not in the know of using them. As a result of residing in an area that was close to a bank mitra the women had access to banking services in their vicinity, but due to the lack of sufficient incentive in the absence of significant savings, they had not bothered to educate themselves on the usage of banking services.

Lack of Usage Because of the Absence of Incentives
In the absence of incentive, apart from a medium to store and transfer money, bank accounts did not hold a lure for the women interviewed. Nearly 30% of the women admitted that they had opened an account in anticipation of receiving monetary benefits as a result of the transfer, but felt that their hopes were not met sufficiently. Many were misinformed about the possibility of the government funding their accounts for having opened them and had opened their accounts in lure of that funding.

Limitations of the Study
The study was conducted in an urban village of Nathupur, where the participants were employed outside of their homes. They perceived themselves to not be subjugated by patriarchal restrictions when it came to control over their mode of savings and were also not restricted by constraints of mobility in connection over their bank accounts. All of the women who had children were motivated to save for their children, particularly daughters, but were restrained by their miniscule disposable incomes when it came to saving.

Conclusion
The access to banking services and the benefits of banking are problems that financial institutions have great incentive to solve because of the attendant gains involved in boosting the strength of their deposits. The existence of an unbanked population owes its origins to the absence of funds to bank with in the first place. While poverty is a problem that requires systematic and targeted intervention on the part of the government, the problem of financial exclusion is one that private actors have sufficient motivation to address.

PMJDY and Inclusion To Banking Services-Evidence From the Ground

In August 2014, the Pradhan Mantri Jan Dhan Yojana (or simply the PMJDY) was unveiled with the ambitious target of opening 150 Million bank accounts in India and liberating the poor in India from the vicious cycle of poverty (or “vish-chakra se gareebon ki aazaadi ka parv”).

Under the PMJDY, account holders were promised a RuPay debit card, insurance coverage of Rs 100,000 in the event of an accident and life insurance coverage of an additional Rs. 30,000. Apart from this, account holders were promised an overdraft facility of Rs.5,000, but this was to be offered once the bank was satisfied of the usage of the account. It is also interesting to know that the scheme was recognized by the Guinness World Records for the most number of accounts (18,096,130) opened in single a week ie. 23 to 29 August, 2014.

Efforts of the government were also recognized by IFC in their Global Findex Report, 2017, that had reported that between 2014 and 2017 account ownership in India had doubled since 2011 to 80 percent. The report also mentioned that account dormancy stands at 48%, ie. only 42% of bank accounts in India have seen any activity (ie atleast a deposit or withdrawal) in the last year. Account dormancy in India is the highest in the world and more than twice the average for developing countries (which stands at 25%). It is pertinent to note that in 2011, prior to the launch of the PMJDY scheme, 33% of the Indian population had a bank account.

The Study
To understand impact of the PMJDY amongst working women in an urban Indian village, the author conducted a study amongst 110 women who earned between Rs. 5,000 to Rs. 15,000 ie USD 70 to USD 210 in Nathupur, Haryana. The author followed an approach of informal questioning on the usage of their PMJDY accounts, usage of debit cards, bank mitra services, insurance and credit facilities. Mirroring the findings of the Global Findex Report, 2017, the author found the following results of the study.

Lack of Usage Because of the Lack of Funds
Nearly 80% of the women studied did not use their PMJDY accounts after having opened them. They cited the lack of savings as the primary reason for not opening bank accounts. Most of the respondents studied were aware of the importance of saving and the procedure to withdraw and deposit money, but did not find any use of their accounts because they simply lacked the disposable income after meeting their basic consumptive needs.

Lack of Usage Because of the Lack of Awareness
A vast majority of the women studied had not used their bank accounts because they were not aware that accounts opened at a branch cannot be used in another location. They had not received debit cards for their accounts and they were not in the know of using them. As a result of residing in an area that was close to a bank mitra the women had access to banking services in their vicinity, but due to the lack of sufficient incentive in the absence of significant savings, they had not bothered to educate themselves on the usage of banking services.

Lack of Usage Because of the Absence of Incentives
In the absence of incentive, apart from a medium to store and transfer money, bank accounts did not hold a lure for the women interviewed. Nearly 30% of the women admitted that they had opened an account in anticipation of receiving monetary benefits as a result of the transfer, but felt that their hopes were not met sufficiently. Many were misinformed about the possibility of the government funding their accounts for having opened them and had opened their accounts in lure of that funding.

Limitations of the Study
The study was conducted in an urban village of Nathupur, where the participants were employed outside of their homes. They perceived themselves to not be subjugated by patriarchal restrictions when it came to control over their mode of savings and were also not restricted by constraints of mobility in connection over their bank accounts. All of the women who had children were motivated to save for their children, particularly daughters, but were restrained by their miniscule disposable incomes when it came to saving.

Conclusion
The access to banking services and the benefits of banking are problems that financial institutions have great incentive to solve because of the attendant gains involved in boosting the strength of their deposits. The existence of an unbanked population owes its origins to the absence of funds to bank with in the first place. While poverty is a problem that requires systematic and targeted intervention on the part of the government, the problem of financial exclusion is one that private actors have sufficient motivation to address.