The Jan-Dhan Yojana, four years later

The Pradhan Mantri Jan-Dhan Yojana (PMJDY), one of the flagship schemes of the present government, was launched in August 2014. The ‘J’ in JDY is the ‘J’ in ‘JAM’ (Jan Dhan-Aadhaar-Mobile) through which the Economic Survey of 2015 claimed that “every tear from every eye” could be wiped. As the Narendra Modi government enters its fifth year, a critical evaluation of the scheme is in order, especially since this is one of the schemes through which the government is trying to battle its anti-poor image.

The recently released World Bank Global Findex data show that 80% of Indian adults now have a bank account, which is being celebrated as the success of the JDY. While the increase in the proportion of adults having bank accounts is indeed impressive (80% in 2017 from 53% in 2014), 48% of those who have an account in a financial institution made no withdrawal or deposit in the past one year.


Financial inclusion is not just about opening bank accounts, but also about using these accounts and providing access to formal credit. In fact, the major limitation of the JDY has been that while it has managed to get many people to open bank accounts, there is no commensurate increase in the use of these accounts, availability of formal credit, or savings in financial institutions, especially among the country’s marginalised and poorer sections.

Access to formal credit

The Jan-Dhan Yojana, four years later

One of the ways in which access to credit can be assessed is the credit-deposit ratio, which tells us how much credit can be availed per ₹100 of bank deposits by a particular population group. The Reserve Bank of India (RBI) categorises the population into rural, semi-urban, urban, and metropolitan. We look at the first two regions specifically where one would expect the poorer beneficiaries to be present in larger numbers. Figure 1 shows that the credit-deposit ratio for the rural population increased from 41% in 1999 to 66.9% in 2016. However, much of the rise took place before the JDY was launched, particularly during the tenure of the United Progressive Alliance-1 government, when the credit-deposit ratio increased from 43.6% in 2004 to 57.1% in 2009. Since 2014, it has more or less stagnated in rural areas and has deteriorated slightly from 58.2% in 2014 to 57.7% in 2016 for semi-urban populations. Therefore, there is no sign, at least on this count, of increased access to formal credit that the PMJDY is supposed to have ensured for its beneficiaries.

To get a more accurate picture of access to credit for poorer populations, we look at the data by credit size. The RBI provides figures for credit at a disaggregated level in terms of small versus large borrowers. Small borrowers are defined as those with outstanding loans under ₹2 lakh. And the picture here is no better. The share of small borrowers in total credit has also been falling during the Modi government (Figure 2). In fact, it has been falling since 2002. While the decline in the share during the 2004-14 period can be explained by the dramatic rise in corporate credit of large borrowers, there is no reversal in this trend even after the rate of growth of credit fell in general in more recent times as a result of rising non-performing assets and the debt overhang of public sector banks. Even in 2016, the best year under Mr. Modi on this count, it merely matches the lowest rates of growth witnessed during the crisis period of 2009-10. Based on these trends, it can be argued that there seems to be no increase in access to credit for the poor whether as a result of the JDY or otherwise. At best, the status quo has been maintained.

To further probe access to credit for small borrowers, we look at these loans in two categories — agricultural credit and personal loans — which are more likely to be the ones which JDY beneficiaries will be using as against industrial or other loans. The data show that while the share of small agricultural credit has stagnated during this regime, that of the small personal loans, which covers home, vehicle, durable goods and so on, has fallen.

Dealing with money lenders

Poor households in India, in the absence of access to formal credit, have to deal with moneylenders who charge exorbitant rates of interest. This is one of their biggest worries. A recent source that is available in this regard is the Household Survey on India’s Citizen Environment and Consumer Economy, 2016, which shows that while for the top 1% of the population, one in six are exposed to informal credit, within the poorest section of the population, the figure is four times as high, with two in three taking credit from informal sources. Access to bank accounts seems to have had little effect on their dependence on private money lenders.

About the issue of money lenders, a study by the RBI in 2017 states: “We document high levels of unsecured debt, and perhaps more importantly, debt taken from non-institutional sources such as moneylenders. Such debt generates high costs for Indian households, and... is likely to lead to households becoming trapped in a long cycle of interest repayments. We note that this phenomenon has been well-documented over the decades, but nevertheless remains stubbornly persistent.” Therefore, it is not surprising that the report finds that nearly half of the households that take loans from moneylenders are not able to repay them in time, which is a typical condition for a debt trap.

To conclude, the available evidence presented so far does not suggest that the precarious conditions of indebtedness that poor people of this country find themselves in has seen any signs of abating as a result of the JDY.

Dipa Sinha is faculty at Ambedkar University, Delhi, and Rohit Azad is faculty at Jawaharlal Nehru University. Emails: and

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Printable version | Apr 12, 2021 5:57:22 PM |

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