Ira Puranik

India is home to a staggering population of 1.2 billion people, as per Census 2011. Of this population, 70 percent reside in rural areas. Precisely, 83 million people constitute the rural India.

But, despite commanding such huge numbers, historically, this section has always been at a disadvantage when it comes to financial empowerment, having always been isolated from mainstream financial and banking services.

In 2014, the Modi 1.0 government launched the Pradhan Mantri Jan Dhan Yojana (PMJDY) in a bid to bring about this rural population into mainstream of banking and finance.

This “people’s wealth” programme was formulated in order to bring about financial inclusion and provide low-cost, affordable financial services to everyone in the country especially for the rural economy. PMJDY was implemented to reduce disposable income and marked the advent of Direct Bank Transfers (DBT) to bank accounts.

This flagship scheme led to a surge in the number of bank accounts that were opened in the wake. Given the many benefits underlined it, which included zero balance account and insurance cover of Rs 2,00,000, the scheme was bound to be a thriving success. Each beneficiary was also issued a RuPay debit card for ATM withdrawals, along with an overdraft facility of Rs 10,000.

The scheme rolled out with a national biometrics programme, Aadhaar to revolutionise financial inclusion through JAM (Jan Dhan-Aadhaar-Mobile) in areas with mobile connectivity.

The Global Findex Report 2017, released by the World Bank heralded India’s exponential growth in the field of financial inclusion to PMJDY. According to the report, the number of account holders in India had grown from 53 percent in 2014 to 80 percent in 2017. However, the report also clearly cites that a half of these accounts remain dormant.

Aasmi, a beneficiary of the PMJDY, hails from West Bengal and works as a house-help in South Delhi. She has the Jan Dhan account, along with the Rupay card. However, she has hardly done any transaction through the Rupay card or in the account.

“We get cash in hand, nobody pays us in our accounts. Bank jane me he paisa kharch ho jata he, aur time bhi nai hota he, kaam miss ho jaega soch ke nai jaate (Going to a bank will cost money and time, and we can’t miss work). ”

She further added “ATM toe chalana atta nai he, kya pata card he andar chala jaye aur paisa khtm ho jaye (I don’t understand how ATM works. Who knows the card might get stuck and my money from the bank will vanish!).”

Government data suggested that there were 35.29 crore accounts under the ambit of PMJDY with a total deposit balance of Rs 96,107.35 crore, as of in March 2019. As per the government reports, the deposits and account holders have steadily increased over the period of five years, set to cross on lakh crore deposits.

Despite such staggering numbers, banking in India remains low in trust and people’s participation. Moneycontrol got in touch with a few bankers and analysts to review upon the same.

Abhinav Prakash Singh, Economist and Asst. Professor at SRCC, mentioned that the PMJDY had been proficient in encouraging financial inclusion. But, the problem between policy making and implementation within the complimentary ecosystem still lingers.

“In terms of rural sector inclusion, financial unawareness and lack of cooperation from Bank managers in terms of imparting knowledge to unaware beneficiaries in most rural areas, have forced people from rural economy to maintain distance from formal banking.”

He further added, “As per the unbanked places are concerned, the physical strain of visiting the banks have also stopped the rural people from indulging in the financial spectrum of the economy. Hence they find it beneficial to visit money lenders and borrow money via oral dealings.”

Singh stated, “Financial literacy is extremely important for total inclusion as most people belonging to the rural sector find banking extremely scary whether in term of lending borrowing or even the documentation process. The banking sector has merely achieved only a limited level of penetration and financial literacy is a healthy way to remove the fear of paper work from these people. "

Sulakshana Razdan, a Central Bank employee who has worked in Neemrana in rural Rajasthan for three years, mentioned that one of the major reasons banking services was not being delivered efficiently in rural areas because women had no control over their finances.

“Most of the government benefits that are provided are sourced through the female head of the family. Since women have absolutely no control over money in these areas, these accounts are operated by the male members who simply withdraw the entire amount from the bank,” she said.

"Lack of trust between the rural borrowers and banks stemmed from the stringent eligibility criteria required for loan dispensation.”

“More often than not, a villager ends up borrowing from the village sarpanch or the money lender on rates as high as 3 percent per day. Since villages are mostly a close-knit community, people find it easier to borrow from someone they know than to apply for a loan at the bank, which is not able to give them loans, because these people don't meet the eligibility criteria,” she added.

“Despite the huge surge in the number of bank accounts post Pradhan Mantri Jan Dhan Yojana (PMJDY), the enthusiasm for banking fizzled out quickly. The beneficiaries misunderstood the stance of the Jan Dhan accounts and eagerly awaited for the Modi- promised Rs 15 Lakh in their accounts. When did not happen, people lost interest. They would withdraw whatever minimal amount they would have and never return to the bank again.”

Another bank official at SBI, North Lakhimpur, Assam also cited the same misunderstanding related to the Jan Dhan accounts that people perceived while opening their accounts. He stated that, though people opened PMJDY accounts at a massive scale, the main agenda was lost because people from urban sector who already had bank accounts were more inclined towards the schemes and the account incentives in contradiction to the actual motive of the Yojna.

“The Yojna was implemented to include the unbanked and under banked section of the society. Financial inclusion is taking place, and increasing post the Jan Dhan yojna but most people from the rural sector still find it scary to undergo the documentation process (submitting of Pan Cards, Aadhar card details, KYC update)."

A senior level manager working at Gramin Vikas Bank, who did not want to be named, said it was not an overnight process even though the PMJDY flagship programme of the Modi 1.0 government had brought about massive financial inclusion.

“As Bank officials, it is our duty to bridge the gap between sections of the economy and encourage more inclusion into the formal banking system. Therefore, we visit unbanked and remotely banked villages every once a week to make the masses aware about finances and interest rates and how the government provides incentives on deposits in Jan Dhan accounts.”

Rajat Kathuria, Director of Indian Council for Research on International Economic Relations (ICRIER), said that financial inclusion faced challenges from the Demand and Supply point of view.

“The rural sector has no regular income, their deposit are meagre and transaction costs are high. Even if the number of deposits increase, the amount deposited per account is minimal from the rural sector. As a result, the cost servicing of these accounts is more in terms of keeping them operational.”

“The government has implemented incentive in the form of the LPG schemes, social security benefits, pension plans etc., but most people do not understand the incentives with the scheme. Micro financial institutions have played a large scale role in implementing Jan Dhan Yojna. Cash flow in the banking sector has taken a rise, but total inclusion still faces challenges.”

“Financial unawareness needs to be tackled. Micro finance institutions, schools, post offices, SIDBIs are playing a huge role in spreading financial literacy and with the advent of mobile phones in rural areas, a more comprehensive approach is building its way into financial inclusion.”