Pradhan Mantri Jan Dhan Yojana was announced by the honourable Prime Minister of India Shri. Narendra Modi in the year 2014, on the eve of Independence Day. The scheme aims to tie every Indian in the rural or urban sector to the mainstream banking system. This will aid the financial status of the account holders as well as foster social security goals of the central government. The scheme is run by the Ministry of Finance and holds the Guinness World Record for the highest number of accounts opened in a week anywhere in the world. Over 1,80,96,130 accounts were opened by individuals during the first week of launch of the scheme.
Under the Jan Dhan scheme, any individual who is older than 10 years of age and does not possess a bank account can open one in his or her name with an opening deposit of zero. Accounts under this scheme can be opened with any registered bank or with Business Correspondent Outlet (Bank Mitr) designed specially to facilitate account opening under the Jan Dhan Scheme.
Advantages of Pradhan Mantri Jan Dhan Yojana
Pradhan Mantri Jan Dhan Yojana was launched at a massive scale to bring under the purview of banking all citizens of the country; irrespective of their financial status or regional location. The scheme has seen tremendous enthusiasm among customers from both rural and urban areas. The scheme is a social policy aimed at providing banking facilities to even those who do not have the money to pay for the minimum account balance at the time of account opening. The Jan Dhan Yojana aims at revolutionizing the way banking is done in the country and it aims to help the economically weaker sections of the society to become financially confident. Let us look into some of the most significant benefits that this scheme offers to the citizens of India.
- Loan benefit against Pradhan Mantri Jan Dhan Yojana
Individuals whose Jan Dhan account completes 6 months are eligible to obtain loans of up to Rs.5000. Although the loan amount seems insignificant as compared to that offered as standard loan by various banks, but is quite substantial when we think of the economic status of individuals that this scheme is aimed at uplifting. The Pradhan Mantri Jan Dhan Yojana is aimed at financial inclusion of the economically weaker section of the society. Most importantly it aims to cover people from the rural areas as well as the unorganised sector of the urban and semi-urban areas.
- Mobile Banking with Pradhan Mantri Jan Dhan Yojana
Mobile Banking is not a new innovation anymore. Various private and public banks offer mobile banking facilities to customers. However, keeping in mind the economic status of people below poverty line, Pradhan Mantri Jan Dhan Yojana aims to make available certain basic financial transactions via ordinary mobile phones and not smart phones. This step will ensure that even people from rural areas and those from the unorganized sector have access to quick and convenient banking options. The idea behind this feature is to innovate as much as possible to ensure financial inclusion as well as financial security to as many Indians as possible.
- Insurance benefits under the Pradhan Mantri Jan Dhan Yojana
The best and the most significant benefit of Pradhan Mantri Jan Dhan Yojana is that it brings under the purview of insurance, a lot of people who could not have availed insurance out of their own pocket. The scheme offers a life cover of Rs.30,000 to customers who comply with certain norms of the scheme and offers Rs.2,00,000 as insurance sum in the event of death due to accident.
Apart from the above listed standard benefits of the scheme, the Yojana also offers the following macro level benefits for the entire nation to progress.
- An account for each family which ensures they have a savings account to put away their savings into.
- Each family gets a RuPay debit card along with the Jan Dhan bank account. This ensures easy withdrawal of money from ATMs.
- The Jan Dhan Yojana account is a zero balance account and as such account holders are not required to maintain a minimum balance in their accounts.
- Pradhan mantri Jan Dhan Yojana brings under the purview of insurance a lot of people who cannot afford insurance out of their own pocket. Insurance coverage for all means higher value being attached to lives of citizens.
- An overdraft facility of Rs.5000 will be offered with Pradhan Mantri Jan Dhan account. In case the overdraft availed is paid back promptly, the bank may increase this limit to Rs.15,000. This however, is solely based on the discretion of the bank in question.
- Pradhan Mantri Jan Dhan Yojana is an aadhar linked scheme so as to avoid fraud related to account opening.
- Interest similar to that offered by various public and private banks on their savings accounts will apply to Pradhan Mantri Jan Dhan accounts too. Hence, individuals get to earn interest on the amount that they deposit and save in their Jan Dhan accounts.
- Pradhan Mantri Jan Dhan account can be used to transfer money to and from various other public and private banks in the country.
- Account transfer for Pradhan Mantri Jan Dhan Yojana can be done from one bank in the country to another. This is possible since all participating banks are connected via the core banking solution or CBS.
- Pradhan Mantri Jan Dhan Yojana might prove instrumental in reducing the dependency of farmers on local money lenders. This is one of the topmost reasons for farmers getting stuck in a vicious circle of debt. Loan and overdraft facility linked with this account will allow farmers to avoid borrowing from small money lenders who have no formal account keeping processes and as such indulge in fraudulent transactions to extract more payment from borrowers.
- Under the Pradhan Mantri jan Dhan Yojana, at the time of account opening, customers will be handed over a kit that includes account passbook, cheque book as well as a financial literacy guide. However, the contents of this kit too might differ from one bank to another.
Zero Balance Requirements
To open a Jan Dhan account is free of cost and does not require any amount to be deposited initially. Most savings bank accounts require an initial deposit to open a bank account and also a minimum balance to be maintained on a monthly or quarterly basis. But with a Jan Dhan account, these requirements are done away with so that anyone can open this account even if they do not have money to deposit right away.
Interest on Deposits
Deposits made into the Jan Dhan accounts are eligible to earn interest at the rate declared which is subject to change from time to time. Interest rates will be similar to that offered by various public and private banks.
Cheque Book Facility
Account holders can avail a chequebook from their bank if they require. This will be helpful in making payments without cash. To get a cheque book, there is a minimum balance required in the account.
Savings for the family
The Jan Dhan scheme provides for an account for each family. This facility ensures they have some form of financial inclusion that allows them to start saving and growing their money.
Debit Card Facility
Along with the Jan Dhan bank account, every family will get a RuPay debit card. This gives account holders easy access to their money when they need it. They can deposit the money and earn interest on it and withdraw it from an ATM when the need arises.
After completing six months of satisfactory operations of the Jan Dhan account, an overdraft facility of Rs.5000 might be offered. In case the overdraft availed is paid back promptly, the bank may increase this limit to Rs.15,000, at its own discretion. Although the loan amount seems insignificant as compared to that offered as standard loan by various banks, it is quite substantial when we think of the economic status of individuals that this scheme is aimed at uplifting. The Pradhan Mantri Jan Dhan Yojana targets the economically weaker section of the society. Most importantly, it aims to cover people from the rural areas as well as the unorganised sector of the urban and semi-urban areas.
Mobile banking is a very important feature of the Pradhan Mantri Jan Dhan Yojana. This facility is not designed for smartphones but rather any mobile phone. The aim of this is to ensure people from the rural and unorganised sectors have access to their bank accounts and certain facilities that will provide convenience to the account holders. This feature will help achieve the objective of financial inclusion and provide financial security to many. The mobile banking feature allows account holders to transfer money from their phone and also withdraw money without an ATM card.
The best and the most significant benefit of Pradhan Mantri Jan Dhan Yojana is the provision of insurance. The opportunities of insurance coverage are limited in the rural areas and to most it is impossible to think of paying the premium for a policy. With the Jan Dhan account, customers who fulfill the eligibility conditions will receive Rs.30,000 life cover which will be payable to the beneficiary upon the death of the account holder.
Personal Accident Insurance
The scheme also provides for personal accident insurance under the following conditions: The Rupay card holder must have performed at least one financial transaction successfully within 90 days from the date of accident. Non-financial customer-induced transactions will also be included. Transactions should be carried out at any bank branch, bank mitra, ATM, POS, or E-com channel. This accident insurance is provided under the Rupay Insurance Program 2016-17.
Pradhan Mantri Jan Dhan Yojana is an aadhaar-linked scheme which helps avoid fraud related to account opening. Individuals who receive various benefits under various government schemes like LPG subsidy can now receive the amount directly into their PMJDY accounts. Aadhaar-linking ensured transparency, eliminates fraud and proves to be highly beneficial for the government and the citizens.
Access to Pension Schemes
Holding a Jan Dhan account will provide easy access to pension schemes available from the government. It is important for every citizen to start saving even a small amount to ensure a dignified old age.
Pradhan Mantri Jan Dhan account can be used to transfer money to and from various other public and private banks across the country. Account transfer for Pradhan Mantri Jan Dhan Yojana can be done from one bank in the country to another. This is possible since all participating banks are connected via the core banking solution or CBS.
Apart from the above listed standard benefits of the scheme, the Yojana also offers the following benefits for the entire nation to progress.
Pradhan Mantri Jan Dhan Yojana might prove instrumental in reducing the dependency of farmers on local money lenders. This is one of the topmost reasons for farmers getting stuck in a vicious circle of debt. Loan and overdraft facility linked with this account will allow farmers to avoid borrowing from small money lenders who have no formal account-keeping processes and are known to indulge in fraudulent transactions to extract higher payments from borrowers.
Under the Pradhan Mantri jan Dhan Yojana, at the time of account opening, customers will be handed over a kit that includes account passbook, cheque book as well as a financial literacy guide. However, the contents of this kit might differ from one bank to another, too.
- The scheme will help enlighten a majority of the unorganised sector of the benefits of banking and being included in the financial system.
Target of the Pradhan Mantri Jan Dhan Yojana
The scheme was targeted at the rural and unorganised sector by sending emails to banks informing them of the PMJDY scheme. The scheme was implemented with high targets such as opening 1 lakh accounts on the first day. Over the next few years, the government hoped to open 7.5 crore accounts but surpassed this number by a great margin. The reality of this scheme is reflected in the data below as on 04.01.2017:
- The government has opened 26.51 crore Jan Dhan accounts in the rural and urban sectors.
- Currently, there are 16.11 crore accounts opened in the rural areas and 10.40 crore accounts in the urban areas.
- Out of these accounts, 24.61% have a zero balance. Although this number has been disputed due to the fact that banks have been depositing Re.1 upto Rs.10 in accounts to bring down the percentage of zero balance accounts.
- The total balance in these accounts amounts to Rs.70070.79.
- 15.19 crore accounts have been linked to Aadhaar.
- 20.93 crore Rupay cards have been issued.
The scheme has faced a number of problems but has also proven to be a blessing for many. Through the PMJDY, crores of people now have insurance, access to overdraft facilities and loans, and can enjoy the benefits of Aadhaar. Investigations are unearthing underhanded practices carried out by banks - such as depositing Re.1 in zero-balance accounts - due to immense pressure levied on them to make the scheme work. Due to this, many people - who need it the most - might lose out on benefits that might crop up in the future. This does not mean the scheme is a failure, but does need to be corrected so that the targeted segment of society reaps optimum benefits from the scheme.