Introduction:
In a developing country like India, access to banking facilities is essential for empowering citizens and reducing poverty. For decades, a large section of India’s population remained outside the formal banking system due to poverty, illiteracy, and lack of awareness. To address this issue, the Government of India launched the Pradhan Mantri Jan Dhan Yojana (PMJDY) on 28th August 2014. Popularly known as the “free bank account scheme,” it is one of the world’s largest financial inclusion programs.
Objectives of the Scheme
The main aim of the Jan Dhan Yojana is to provide universal access to banking facilities for every household in the country. The scheme ensures that the poor, marginalized, and financially weaker sections are not deprived of basic banking services. The key objectives include:
- Opening zero-balance savings accounts for citizens.
- Providing a RuPay debit card with accidental insurance coverage.
- Enabling direct benefit transfer (DBT) of government subsidies.
- Promoting the habit of saving and financial literacy among rural and urban poor.
- Reducing dependence on moneylenders by improving access to institutional credit.
Features of the Scheme
The PMJDY scheme comes with several unique features that make it highly beneficial:
- Zero-Balance Account: Any Indian citizen can open an account without the requirement of minimum balance.
- RuPay Debit Card: Every account holder receives a RuPay card which can be used at ATMs, POS machines, and online transactions.
- Insurance Benefits: Account holders are eligible for an accidental insurance cover of ₹1 lakh (later enhanced to ₹2 lakh for accounts opened after 2018) and a life insurance cover of ₹30,000 for those who opened accounts before January 2015.
- Overdraft Facility: After successful operation of the account for six months, holders can avail an overdraft facility of up to ₹10,000.
- Direct Benefit Transfer (DBT): Government subsidies like LPG subsidy, pension, and scholarships are directly credited to these accounts, ensuring transparency and reducing leakage.
- Mobile Banking: The scheme promotes mobile banking through simple apps and USSD services, enabling easy fund transfers even without smartphones.
Impact of the Scheme
The Pradhan Mantri Jan Dhan Yojana has had a revolutionary impact on India’s financial system. Within a short span of time, it set a Guinness World Record for opening the highest number of bank accounts in a single week. By 2023, more than 48 crore accounts were opened under the scheme with deposits crossing ₹2 lakh crore.
The impact can be seen in several areas:
- Financial Inclusion: Millions of people who were earlier excluded from the banking system now have access to savings accounts, credit, and insurance.
- Women Empowerment: Many women, especially in rural areas, opened their own accounts and gained financial independence.
- Reduction in Middlemen: Direct transfer of subsidies has reduced corruption and ensured that benefits reach the intended beneficiaries.
- Promotion of Savings: Poor families, who previously relied on informal channels, are now encouraged to save money safely in banks.
- Support during Emergencies: During the COVID-19 pandemic, financial assistance under government relief packages was directly transferred into Jan Dhan accounts, helping millions of poor families survive the crisis.
Challenges and Criticisms
Although highly successful, the scheme also faces certain challenges. Many accounts remain dormant due to lack of regular transactions. Some beneficiaries are still unaware of the additional benefits like overdraft and insurance. Financial literacy among rural poor is still low, which limits the scheme’s full potential. Banks also face pressure to maintain a large number of zero-balance accounts.
Conclusion
The Central Government’s free bank account scheme, or Pradhan Mantri Jan Dhan Yojana, is a landmark initiative in India’s journey towards financial inclusion. By providing banking access to the poorest sections of society, the scheme has not only promoted economic empowerment but also ensured transparency in government welfare programs. Despite challenges, the scheme has laid a strong foundation for a financially inclusive India. In the coming years, with more awareness and digital penetration, the scheme is expected to further strengthen the economy and uplift millions of families out of poverty