Jan Dhan scheme can show the world how to improve financial inclusion

Over the span of just nine years, Jan Dhan Yojana has not only drastically reduced ‘financial untouchability’, but also become an embodiment of empowerment, particularly for the marginalised sections of society.

The Pradhan Mantri Jan-Dhan Yojana (PMJDY), the National Mission for Financial Inclusion, completed nine years of its impactful existence a few days ago. In the annals of India's economic journey, few initiatives have shone as brightly as the Jan Dhan Yojana. Launched with the goal of fostering financial inclusion, it catalysed a revolution in the way millions of Indians access and manage their finances. Over the span of just nine years, it has not only drastically reduced ‘financial untouchability’, but also become an embodiment of empowerment, particularly for the marginalised sections of society.

The PMJDY initiative includes insurance provisions, offering accident coverage of up to Rs 1 lakh and life coverage of Rs 30,000 for accounts opened between August 15, 2014 and January 31, 2015. Notably, these benefits have progressively expanded, with RuPay cardholders witnessing an increase in complimentary accidental insurance coverage, raised from Rs 1 lakh to Rs 2 lakh for PMJDY accounts established after August 28, 2018. Within the PMJDY framework, an impressive count of approximately 34 crore RuPay cards has been distributed to Jan-Dhan accounts, without any associated charges thus far.

However, the true heartbeat of Jan Dhan's achievement lies in its heartening impact on the grassroots level.  Jan Dhan accounts crossed the 50-crore milestone (of the 140 crore Indians), with a remarkable 56 percent belonging to women and 67 percent being situated in rural and semi-urban areas. This initiative's effectiveness is evident in the substantial cumulative deposits that have surpassed the Rs 2 lakh crore mark. While the number might seem smaller than a mid-sized bank’s balance sheet, it is the financial nest egg of sorts for the nearly 50 crore Indians. The average deposit per Jan Dhan account surged from a modest Rs 1,065 in March 2015 to a commendable Rs 4,087 in March 2023, despite the challenges posed by the Covid-19 lockdown. The programme's role as a beacon of hope during tumultuous Covid-times was nothing short of commendable.

Criticism about the dormant accounts in the Jan Dhan programme is sour grapes. Its dormant accounts statistic is better than or the same as the entire Indian banking sector ratio of dormant accounts. Approximately three crore new Jan Dhan accounts are still being opened annually, and it might be reaching saturation point soon.

While Jan Dhan has made remarkable strides in the realm of financial inclusion, it's crucial to acknowledge the remaining frontiers that still require attention. Accessibility to credit for daily wage workers and micro, small, and medium enterprises (MSMEs) remains an ongoing challenge. This is where creative financial engineering has to be done to use data available with the digital public infrastructure and Jan Dhan accounts to bring newer lending products for the account holders. Imaginative products that could offer daily repayment options could help in ease of repayment, and raise consumer trust. Furthermore, the concept of a pension scheme tied to daily savings of as little as Rs 5-25 is another idea that merits exploration. Such an approach could play a pivotal role in securing the future of those who often fall through the cracks of traditional financial systems.

Jan Dhan as a Service

The convergence of the JAM trinity — Jan Dhan bank accounts, Aadhaar, and mobile phones — has not only fostered a paradigm shift in financial inclusion within India but also laid a promising foundation for India's services exports to global markets. They also underscore the potential to serve as potent tools for India's economic growth and also for its global diplomacy.

India's prowess in delivering low-cost, high-impact solutions and its commitment to broad-based inclusion can find a receptive audience overseas. The success of the unified payments interface (UPI) system, with nearly 10 billion transactions per month, is another testament to the efficiency and convenience that India's digital infrastructure offers.

Moreover, India's track record of innovation through technology that delivers meaningful change, coupled with the sheer scale of its digital services ecosystem, positions the nation as a prime contender in the global services market. Harnessing the JAM trinity's capabilities, India can craft a narrative of responsible and impactful innovation that resonates across borders. By showcasing the potential for cost-efficient solutions that drive high levels of inclusion, India's Jan Dhan as a Service (JAAS) exports can gain momentum, drawing international partners and clients who seek both economic viability and social impact. As Indian innovation continues to bridge gaps and break barriers, leveraging the JAM trinity can enable India to emerge as a trailblazer in exporting innovative, transformative, and inclusive services to the global stage. The time has come for India to harness the momentum and create a truly inclusive financial landscape for all. Isn’t this the time for India to start its services export of its JAM trinity learnings and its digital public infrastructure framework?

Srinath Sridharan is author, policy researcher and corporate advisor. Twitter: @ssmumbai. Views are personal, and do not represent the stand of this publication.