The PM Jan Dhan Yojana seems to be actually making a dent in problems like poverty and inclusion at the root levels.
How far has Jan Dhan Yojana come?
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What role do financial markets play in the lives of citizens? This question assumes different colours depending on whether we are talking about developed markets, or developing markets. In rich world, there are concerns that the financial sector (that offers products etc. to households) has become too big, and too complex. But in India, we are still in the initial stages and the government itself is pushing financial products usage to “complete” the market. The largest outreach programme in the world in this field has been – the Pradhan Mantri Jan Dhan Yojana (JDY). Launched on 28-08-2014, Objective : provide banking services to unbanked population of India (25.5 crore individuals benefitted by November 2016). Financial inclusion is critical to ensuring a harmonious society. They directly benefit lower income households in India, as they promote savings, spending and reduction in transaction costs. Of the JDY bank accounts, 77% have maintained a positive balance. That is good. Over time, both savings and transactions have gone up. As people become more familiar with formal banking, they increase usage.
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There are two clear benefits that can be seen : (1) New capital comes into banking system (= fresh JDY deposits), allowing more lending, and (2) Many lower income households wanted credit, but never knew how to approach Banks. Now, this unmet demand can be met (at least for some households). If this credit grows big, then a massive impact on consumption – investment – employment at the bottom of the pyramid is possible. Studies are showing that regions in India with greater JDY exposure are showing greater increase in number and amounts of new loans granted. So the claim that unbanked households are now getting banking benefits may be true. It seems that in the long run (at least 2 to 3 years from now), the impact on GDP itself will be seen. There seems to be little impact on investments and inflation (though it is still too early to tell). Overall, PMJDY seems to be making its mark. That will be a big achievement given the history of Indian banking.
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