THE HINDU | JAYSHREE VENKATESAN | AUGUST 17 2015
The PMJDY celebrates success on its website, but thousands of Marys remain outside the banking system. This won’t change unless the scheme alters both design and implementation
The World Bank’s latest Global Findex study says the number of people accessing a formal bank account in India increased from 35 per cent in 2013 to 53 per cent in 2014. However, we need to consider three things. First, the increase in ownership of accounts is still only 18 per cent. Second, dormancy of accounts is also amongst the highest in India at 43 per cent, indicating that not everyone who has an account uses it. Third, and most importantly, this still leaves close to half the country’s population out of formal financial institutions. The PMJDY is attempting to financially include the poorest in India. However, the problem of financial inclusion is not just one of access, but also of uptake. Given the sheer numbers of those excluded, it is virtually impossible for any one programme to create full financial inclusion. The PMJDY rests on the assumption that pressurising banks to open a savings account under the programme would solve the problem of access, while dormancy is addressed by bundling other financial services such as overdraft facilities and insurance.
This is a naïve assumption. My research across 368 households in four districts in Tamil Nadu over the last six months, shows that there are several barriers to banking, chief being the lack of awareness of the programme and its features, among bank employees, business correspondents as well as households surveyed.
In Tamil Nadu, the Hindi words “Jan Dhan Yojana” were referred to as Jal Dhal, Jal Dhan or some variation thereof, amongst the few who did know about it. Second, as Mary’s case illustrates, there is a reluctance amongst bank officials to open an account for the very poor for reasons that range from apathy to ignorance to arrogance. Third, the account only allows for access to the overdraft facility at the discretion of the banker and both overdraft and insurance can only be accessed subject to…continue reading