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Jan Dhan Yojana : The One Rupee Trick.

New Delhi, Sept. 26 -- Remember the first-ever Independence Day speech given by Prime Minister Narendra Modi from the ramparts of the Mughal-era Red Fort. It had a slew of schemes for the poor. One of the schemes promised to eliminate "financial untouchability", to use his colourful language, was the Pradhan Mantri Jan Dhan Yojana (PMJDY).

It was termed as the world's best financial inclusion scheme, aimed at linking tens of millions of Indians with banking services and inculcating a habit of using bank services.

Not only this, the scheme found a place in the Guinness Book of World Records when during January 2015, 115 million bank accounts were opened in a short span of five months. The PMJDY website claimed to have achieved 100 percent success rate. Poor people opened the accounts, thinking that the government would transfer funds into them.

Yes, the intention was to implement the direct benefit transfer scheme and initiate transfer of subsidies directly into the beneficiaries' accounts. The bank accounts came with benefits like life insurance worth Rs. 30,000, accidental insurance worth Rs. 1 lakh and overdraft facility of Rs. 5,000 in case the account is maintained properly. And all the accounts opened under the scheme were zero-balance accounts. In other words, the customers were not required to maintain any minimum balance.

And this is where the twist came. A report published in the Indian Express last week laid bare how ill-planned the scheme was! No doubt the intention of having the scheme was not only to link people with banking services but also to eliminate the leakages that normally happened under schemes like the Mahatma Gandhi Rural Employment Guarantee Scheme (MNREGS). But then, the scheme failed to create awareness amongst the masses about the benefits of having a bank account. The ideal situation would have been when people started using bank accounts for saving or other purposes.

Unfortunately, the banks were burdened with over 76 per cent zero balance accounts during 2015. And this was followed by instructions to reduce the number of zero-balance accounts. Imagine: the effort required to first open the zero balance accounts, maintain and provide services to the customers, and then ultimately ensuring the operation of accounts.

A Press release issued on August 12, 2015 stated the methodology used by the banks in reducing the zero-balance accounts. It said that senior officials from the Ministry of Finance conducted videoconferences on a weekly basis to monitor the progress of the scheme.

The government also conducted special campaigns to educate customers regarding benefits of having a bank account and also encouraged people to use the accounts for becoming eligible for the overdraft facility.

The Press release claims to have reduced the zero-balance accounts to 46.93 per cent. The number has come down to 23.93 per cent by September14, 2016, as per the latest data available on the website.

However, if one goes by the result of the RTI application filed by the Indian Express group, it has an entirely different story to tell. The bank officials were under pressure from the top, as the report says, to bring down the level of zero-balance accounts. Some of them made a genuine effort and asked people to deposit money into their account, a minimum of Rs. 50, to quote the report, on the plea of issuing passbooks.

In some cases, the bank officials themselves deposited money ranging from Rs. 1 to Rs. 10 to make the accounts operative. There were cases where customers were surprised to see money in their accounts, indicating the bank officials did not even take their consent before operating the accounts, something that came as a shock to the industry and was entirely against the code of customer rights.

Besides, it also raised suspicion about the credibility of the banking officials looking after the accounts. For, if they can deposit money without permission from the customers, they can also manipulate and withdraw money from the accounts.

In some instances, the customers were not allowed to use the accounts without depositing some money. The report says that 18 public sector banks have 105 million Jan Dhan accounts with merely Re. 1 as balance.

Needless to say, this one rupee is basically the contribution of the bankers themselves. And top 12 banks have 36 per cent of the accounts with a balance of Rs. 10. Incidentally, these banks had the majority of Jan Dhan accounts.

The government's efforts of inculcating saving and banking habits amongst the poorest of the poor proved futile. It also raises a question, whether what was reported in the Press release was actually done on the ground? Or it was merely on papers to dress up?

And if people received any money from the national social assistance scheme, they withdrew the entire amount immediately to meet expenses. To sum up, the habits remained the same. Albeit, the banks had to modify their operations to make the flagship scheme of financial inclusion an immediate hit.

Not only this, there were reports alleging that one fourth of the accounts opened under the scheme were opened by people who already held an account. And this statement was given by none other than the secretary for financial services in the ministry of finance, raising questions on the success of the scheme.

Soon after the Indian Express report appeared, Union Finance Minister Arun Jaitely ordered a probe into the one rupee trick to reduce the number of zero-balance accounts, which is a welcome step as the government did not go into the denial mode.

What the minister failed to understand is that the Express report did not raise a question on the quantum of deposits made but on the number of zero-balance accounts and the way pressure was mounted on the banks to reduce their number, forcing them to manipulate. The main concern is the authenticity of the government data on zero-balance accounts in view of the jugaar technology adopted by banks to basically show an in-operative account as operative.

As far as theory is concerned, PMJDY is based on the strong principles of financial inclusion i.e. access to a formal financial institution through saving accounts and its linkage to other financial products to avoid dormancy of accounts. The RuPay card also minimises the workload of a banker as it can be used for transactions, without approaching the bank branch. However, awareness on use of the card seems to be low on the ground. Even official data showed a lag in issuing the cards. Some of the banks have issued RuPay cards only to 50 per cent of the account holders.

A study conducted in the four districts of Tamil Nadu (which achieved100 per cent saturation rate) on the scheme by The Hindu Centre for Politics and Public Policy in 2015 suggested that 75 per cent of the account holders have never used the RuPay Card. Some of the respondents during the study expressed security concerns on the use of debit cards.

It also raised a question on the way monitoring is done. Some of the bank officials claimed that a survey was conducted to ensure that the scheme reached out to 100 per cent households through bank employees, NGOs, students etc. Another banker said that when it took more than a year to complete the Census how could the government expect the monitoring survey to be done within a few months.

As to how a few districts declared 100 per cent success rate under the scheme, the study reveals a curious story. An announcement was made in a regional language newspaper saying that every household has been covered under the scheme and the district has achieved 100 per cent saturation. It was published with a clause that in case someone has any objection, it may be communicated within a specified period to the concerned office. Since no one came forward, the districts were declared 100 per cent saturated. The announcement was made assuming that everyone is literate and capable of raising a concern!

Incidentally, this was displayed on the website of one of the Banks during December 2014 as mentioned in the study. It indicates how announcements of the scheme reaching out to 99.74 percent households were made by the government within a few months of its launch.

As to how the direct benefits scheme worked, let's see how Puducherry responded to JAM (JAN Dhan ADHAAR and Mobile) technology. As soon as the Union Territory declared 100 per cent success, the government conducted a pilot on replacing the Public distribution system of subsidised food grains with cash transfers. While the numbers showed that the pilot scheme was a huge success, the beneficiaries were found to be running from pillar to post to receive the benefits.

A report published in a leading daily showed that rice was not delivered for the last few months. The employees of fair-price shops did not receive their salary on time for many months. Some of the women stated that their husbands took away the entire money as they withdrew the amount from the ATM. Some said at least rice went straight to the kitchen and they had something to eat. Besides, as the grocery shops provided rice on normal rates and not on subsidised prices, the money was not sufficient to buy food grains. And if food distribution schemes were to be replaced with DBT then what will happen to the huge mountain of food grains?

It shows the incompetency of the government in understanding the diverse dynamics that govern the poorest of the poor. The scheme maybe termed as a huge success only on papers. The Jan Dhan may have helped the government in securing a place in the Guinness Book of World Records but the "financial untouchability" that it intended to eliminate seems to be a distant dream as of now.

(The writer, a company secretary, is with Deepalaya as Director-Communication and she can be reached at

Published by HT Syndication with permission from Indian Currents.

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Publication:Indian Currents
Date:Sep 26, 2016
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