The Pradhan Mantri Jan-Dhan Yojana, a major socio-economic initiative of the National Democratic Alliance government, was announced by the Prime Minister in his Independence Day speech. It is an ambitious attempt at extending formal financial services in a country where only 58.7 per cent of an estimated 24.67 crore households avail themselves of banking services. Despite several steps taken by many governments over the years, financial inclusion has remained elusive. In rural areas 44 per cent of the households and in urban areas 33 per cent of them still do not have a bank account. The NDA government has brought a degree of urgency to the scheme of financial inclusion. A few details of the government’s action plan figured in the budget speech. A Comprehensive Financial Inclusion Plan (CFIP) envisaging coverage of excluded households has been drawn up and is expected to be rolled out under the nomenclature. In its first phase, the Jan-Dhan Yojana will endeavour to provide universal access to all the beneficiaries through sub-service areas (SSA), each of them consisting of 100-150 families in a cluster of villages. Each SSA will be serviced by a business correspondent, who is now being given a pivotal role in facilitating account opening and ensuring smooth bank operations. Unlike in previous action plans, the Jan-Dhan Yojana will have as its focus households rather than geographical areas.
The other important innovation is in extending need-based credit facilities to the new account holders upon their fulfilling certain conditions. A smart card — the Ru Pay card — will be issued. Using this it should be possible for customers to operate their accounts without any external help. This would be one of the most visible manifestations of technology as a tool to further inclusion, others being money transfers through mobile telephones, e-KYCs and cash management by banks to extend their services over such wide areas. Insurance companies will be asked to offer micro-finance packages including insurance. Obviously there are major challenges. Even if operational obstacles can be overcome, there is the important question of keeping the first-time bank account holders engaged. Experience suggests that a high proportion of such accounts are hardly used after the initial enthusiasm wears off. The plan of inclusion, which is part of the Prime Minister’s vision of a Digital India, requires all-round support. The government wants to use these accounts for routing cash transfers in lieu of subsidies for essential commodities. Financial inclusion in that sense is therefore much more than extending banking services. Accompanied by an equally ambitious programme of spreading financial literacy, it can achieve many important socio-economic objectives.
