Special Report – Pradhan Mantri Jan Dhan Yojna Summary: It is one of India’s ambitious financial inclusion schemes that aims to provide basic banking and micro insurance services to India’s poor. The scheme is unprecedented in scale and coverage as more than 1.5 crore or 15 million bank accounts were opened in a single day when PM launched the scheme on August 28. Public Sector banks have opened nearly 6.5 crore accounts against the target to open 7.5 crore bank accounts before 26 January next year. Under the scheme an account holder is entitled to one lakh rupees accidental death cover and 30,000 rupees life insurance cover. It provides universal access to banking services. Basic bank accounts with overdraft facility are provided. Financial literacy program will also be rolled out. Credit guarantee fund will also be constituted. This scheme is also being seen as one strong pillar of vast number of initiatives and schemes that have taken place over the years. Experts point out that, if implemented properly, the Jan Dhan Yojana has the potential to wipe out the financial untouchability. There is a lot of scope for improvement in the way the scheme is implemented at the ground level. Long cue can still be seen outside bank branches. Despite the government’s promise to open at least 2 accounts per household, many still haven’t made it even to their first one. Poor internet connectivity and cumbersome process are acting as impediments for smooth implementation of the scheme. This gets even worse in remote areas where the largest section of targeted group lives. Public sector banks are finding it difficult to cope with the rush. This scheme is demand driven. Despite the massive publicity, several people from the targeted section are not yet aware of the scheme. The connectivity becomes very much important as the money is transferred from the government on online basis. There are about 50000 villages in the country which do not have internet connectivity or have poor connectivity. Public sector banks who are at the forefront of this massive financial inclusion program have urged the centre, state governments and telecom service providers to take corrective measures. Providing telecom services and ICT infrastructure in the remote parts of the country to bring the rural people into the financial system fold is critical to the scheme. Communication remains a huge issue with huge illiteracy levels. Several parts are completely out of reach of any kind of media whatsoever. Banks also need to streamline the process of enrolling people in the rural areas. Under the PMJDY the banks are not mandated to collect the biometric data. Many people are not happy with the overdraft facility of just 500 rupees. Banks and experts are divided over the issue. Banks defend their policy of enhancing the overdraft limit on the basis of credit history of account holders. To create an environment for large scale implementation of PMJDY banking regulator RBI issued a circular allowing banks to open basic accounts even if the customer does not have officially valid documents. These basic accounts would be valid for one year. But the provision has not been implemented properly. It is because of lack of proper communication with bank agents. The target group comprises people who often don’t have any official identification documents. These are the same people who suffer heavily at the hands of money lenders. The recent Sharada Chit Fund scam is an eye opener for the policy makers. In this case lack of access to the formal financial system caused havoc to the millions of the lower and middle class as the chit fund company duped them of their life time savings. The Supreme Court ordered for a CBI probe. In a developing nation like India, financial inclusion has been an ongoing process. Experts trace its roots to the Nationalization of banks in 1960s. In the post-nationalisation era a significant move took place from -class- banking to -mass- banking. Today public sector banks admit that financial inclusion programmes like PMJDY are a critical tool of overall national development. Census data of 2011 says that out of 24.67 crore households in the country, 14.48 cr/ 58.7% of the households have access to banking services. 54% of the rural households are availing the banking services. In urban areas the situation is slightly better as 68% of the households have access to the banking services. This suggests that there is room to move in further. At the end of March 2014 there were 1.15 lac bank branches and 1.60 lac ATMs in the country. Of this 38% of the bank branches and 16% of the ATMs are in rural areas. 1.4 lac bank correspondents are in rural areas. These correspondents represent banks to provide basic banking services. These correspondents need to be trained efficiently. Experts suggest that mere increase in number of bank branches is not sufficient to implement financial inclusion. Banks need to change their approach completely with regard to economically weaker sections and become more poor- friendly. There are lessons to be learnt from the success of the fast moving consumer goods and telecom companies in profitably catering to the lower economic strata of the society. The current state of regulatory environment is also responsible for the sorry state of financial inclusion in the country. Harnessing the wide network of post offices and fair price shops can help in increasing the financial inclusion. Utilization of a network of private telecom operators and fast moving consumer goods companies can also help. Adhaar platform can also be used. The objective of the financial inclusion program is to get rid of the money lenders. There is widespread call for careful monitoring of the program. Financial inclusion programmes in the past have run into rough weather after initial signs of success. There is purchasing power in rural areas waiting to be tapped.