Pradhan Mantri Jan Dhan Yojana (PMJDY)
Context:
28th August 2024 marks the 10th anniversary of the successful implementation of the Pradhan Mantri Jan Dhan Yojana (PMJDY).
About PMJDY:
It is a significant initiative launched by the Government of India on August 28, 2014, aimed at achieving comprehensive financial inclusion across the country. Prime Minister Narendra Modi introduced the program with the ambition to provide universal access to banking facilities for every household, particularly targeting unbanked populations.
Role of Behavioural Economics in PMJDY Understanding Human Behaviour: Behavioural economics integrates insights from psychology into economic decision-making, recognizing that individuals often make irrational choices influenced by cognitive biases and social norms. This understanding is vital for PMJDY, which targets low-income and financially excluded populations. By acknowledging that people may not act in their best financial interest, the scheme incorporates strategies to “nudge” individuals towards better financial behaviours, such as opening and actively using bank accounts.
Objectives and Features:
- Universal Banking Access: Ensuring that every household has at least one basic banking account, which is crucial for financial inclusion.
- Financial Services: Providing access to a range of financial services including savings accounts, credit facilities, remittances, insurance, and pensions, especially for weaker sections and low-income groups.
- No Minimum Balance Requirement: Accounts can be opened with zero balance, making it easier for low-income individuals to participate in the banking system.
- Overdraft Facility: After six months of satisfactory account conduct, account holders can avail themselves of an overdraft facility of up to ₹10,000.
- Insurance Benefits: Each PMJDY account comes with a RuPay debit card that includes an accident insurance cover of ₹2 lakh for accounts opened after August 28, 2018, and ₹1 lakh for those opened earlier. Additionally, there is a life insurance cover of ₹30,000 for eligible beneficiaries.
- Application Process: Individuals can open a PMJDY account at any bank branch or through Business Correspondents (Bank Mitras).
Implementation and Impact:
- The Guinness World Records have recognised this initiative for the most bank accounts opened in a week, reflecting its massive outreach.
- The Jan-Dhan Aadhaar and mobile (JAM) trinity, with PMJDY as one of its pillars, has established a robust mechanism for subsidy delivery, ensuring that benefits reach the intended recipients directly.
- It guaranteed the timely distribution of PM-KISAN instalments and prevented leaks and theft, establishing itself as one of the most major financial reforms in India’s history.
However, the impact of financial inclusion on inclusive growth is not automatic. It requires a comprehensive approach that addresses both the supply side (availability and affordability of financial services) and the demand side (financial literacy and empowerment). Effective regulation, consumer protection, and institutional quality are also crucial for ensuring that financial inclusion translates into meaningful economic empowerment and inclusive growth.
