Fourty-year-old M Ravamma, from Polavaram, a village in the Krishna district of Andhra Pradesh, had a nightmarish experience two months ago. Her husband complained of chest pain and passed away before medical help could reach him. Despite the irreparable loss, Ravamma got financial support from an unexpected quarter, the insurance claim that came attached with the Jan Dhan Yojana account her husband had.

“The claim amount (of ₹30,000) was paid promptly and helped us to stabilise our life after my husband suddenly died because of a stroke of fate,’’ recounts the mother-of-two.

It is not just insurance claims. The Pradhan Mantri Jan-Dhan Yojana (PMJDY), which was launched by Prime Minister Narendra Modi in August 2014, has helped scores of people in the village in many day-to-day transactions.

Take the case of S Edukondalu, a farmer who grows bananas. “Till about a year ago, I used to make business related payments in cash but now I am doing them in cheques,’’ he says about his deals with traders from Vijaywada, about 80 kms away. The farmer adds that his average balance in the savings bank account, opened under the scheme, is now adequate to maintain a cheque book.

There are 3,000 people in this village, which is one of the first in Andhra Pradesh to achieve 100 per cent coverage of the Jan Dhan scheme. The scheme aims to promote financial inclusion by ensuring access to basic services such as savings accounts, credit, insurance and pension. The coverage in Polavaram was accomplished by a three-member branch of Andhra Bank in a record time. Most of the account holders were out of the banking system till now.

Not just Andhra Pradesh, but the PMJDY numbers are stunning nationally. About 20.20 crore people across the country have opened accounts under the scheme; with over a half of them operating the accounts through the RuPay cards, the Indian version of a Mastercard or Visa debit cards.

According to the AP Hota, Managing Director and CEO of National Payment Corporation of India, the new account holders generate 27 lakh transactions per day. This figure will touch 30 lakh per day very soon, says the Managing Director of NPCI, which is the umbrella organisation for retail payment systems in India.

The accounts together hold deposits of ₹32,000 crore, with an average transaction value of ₹2,000. An enquiry with the bankers show that the numbers continue to grow as people open accounts even after the banks have stopped campaigns for new enrolments.

The trends lead to a simple, yet vital question: What is driving these numbers when the old financial inclusion plans thrust by the Reserve Bank of India on public sector banks, which failed to generate enthusiasm in people, as well as the bankers?

As has been the case of Ravamma, the increasing awareness about the social security being offered under the scheme has been an attraction, says Venkatappa Rao, the 24-year-old Manager of Andhra Bank’s Polavaram branch. A post-graduate in biotechnology, Rao wanted to be a scientist but now has found his calling in the banking sector. “Luckily, the claims in cases were settled very fast, spreading the message about the scheme’s inherent financial protection,” says Rao.

There is a huge gap in insurance for the underprivileged in the country. The insurance penetration, measured as a percentage of insurance premiums to the Gross Domestic Product (GDP), stands at 3.3 per cent in India last year, according to data of Insurance Regulatory and Development Authority of India (IRDAI). It is the lowest level of insurance penetration since 2005.

Under the Jan Dhan scheme, the RuPay card comes with an inbuilt accident insurance cover of ₹1 lakh for up to 90 days after the cardholder carries out a successful financial or non-financial transaction at a merchant establishment, an ATM or an e-commerce platform.

There are other drivers too. Prakash Goud, a vegetable seller in Kandi village in Sangareddy district of Telangana, is elated about the overdraft facility for ₹5,000 that comes with the PMJDY account. “This is quite a sum for me and helps in mobilising daily working capital for my business,” he says.

Till recently, Goud had to depend on the local money lenders who would provide call money, to buy vegetables. Call money is a form of private lending where a loan is available immediately, but comes with exorbitant rate of interest. He would walk back with little returns after paying back the borrowed money to the money lender, who would charge an average interest rate of 10 per cent. But now, thanks to the overdraft facility, the vegetable seller doesn’t need the call money anymore.

While in banking parlance, call money is short-term finance for periods ranging from one to fifteen days and mainly an inter-bank deal, the term is now in liberal use for the personal loans taken by individuals from money-lenders at 20-30 per cent per annum and often at even higher rates.

The overdraft facility has also come handy for other purposes such as paying school fee for kids and buying books, points out M Jyothi, a labour whose two children are in 10{+t}{+h} and 6{+t}{+h} standard.

As on Jan 15, 2016, ₹166 crore has been extended by banks to the Jan Dhan account holders in the form of overdraft, a first of its kind for any model of financial inclusion. The amount given to an account holder can be up to four times the average balance he has maintained in the last six month; the overdraft has an upper limit of ₹5,000. There are some other facilities as well.

A PMJDY account holder can withdraw up to ₹2,000 using debt cards and open system prepaid cards at PoS in Tier-III and Tier-VI centres. Till late last year, the limit was ₹1,000. Banks have also been asked not to levy any SMS/message charges on the PMJDY accounts and basic savings bank deposits accounts.

The scheme’s simple Know Your Customer (KYC) norms are also driving the increase in number of accounts. If one has an Aadhaar card, then no other documents are required for opening an account. If address has changed, then a self-certification of current address is sufficient.

Further, if a person does not have any of the officially valid documents, it is still possible to open an account by submitting an identity card, with applicant's photograph, issued by Central/State government departments, statutory/regulatory authorities, public sector companies, scheduled commercial banks and public financial institution or a letter issued by a gazette officer.

Experts point out that the strength of the model is also another positive factor. Globally, models for financial inclusion are either driven by credit or savings. The PMJDY began as a savings-led model, even though some argue that it is actually a hybrid model in view of the overdraft service, which is a credit facility. However, the predominance of savings element qualifies the scheme to be labelled as a savings-driven.

In a recent speech, RBI Governor Raghuram Rajan extended support to the scheme when he observed: “When credit leads the process of financial inclusion, we risk lending to people who have little ability to manage money and overburdening them.

By drawing them into the formal system through savings and payments first, then insurance, we get them accustomed to managing money before tempting them with credit.’’

PMJDY created accounts for much of the excluded population, and went a step ahead by attaching a variety of financial services such as accident and life insurance to these accounts, and sending direct benefits such as scholarships, pensions, and subsidies to these account holders.

The model is integrated through business correspondents, payment banks, and point-of-sales machines so that the services are used frequently.

Any expansion of the direct benefit transfer will be easier with beneficiaries having operative accounts. Governments of Puducherry and Chandigarh have already used the system to directly transfer money in lieu of food grains through the fair price shops. The money transfer saves the government money and brings in efficiencies in the system.

Bankers are a bit troubled by zero-balance accounts, which make up for 29 per cent of the accounts under the Jan Dhan scheme. Though the proportion of these accounts have come down from a high of 75 per cent last year, the impact of the scheme will be higher once more of these accounts become operative. Maintaining these accounts adds to the costs of the banks, who are squeezed for margins.

Also, while places such as Delhi, with higher standard of living and more earning opportunities, will have a lower per cent of zero-balance accounts, the total deposit is low. Delhi, with 29 lakh accounts, has about ₹818 crore in deposits. States with highest deposits are Uttar Pradesh, West Bengal, Rajasthan with ₹4,069 crore, ₹3,269 crore and ₹2,209 crore respectively, in their Jan Dhan accounts.

It is also a challenge to ensure that the overdrafts extended to the account holders will be collected back without any trouble. It remains to be seen if a good credit culture accompanies the interest in opening accounts from a customer point of view.

A speedier transition to a wide range of direct benefit transfers like pensions and foods subsidies could make the scheme complete as the main objective is financial inclusion.