The Pradhan Mantri Jan-Dhan Yojana: An assessment

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Introduction:

The Pradhan Mantri Jan-Dhan Yojana (PMJDY), one of the flagship schemes of the present government, was launched in August 2014. 
The ‘J’ in JDY is the ‘J’ in ‘JAM’ (Jan Dhan-Aadhaar-Mobile) through which the Economic Survey of 2015 claimed that “every tear from every eye” could be wiped. 
A critical evaluation of the scheme is in order.
Background:
The recently released World Bank Global Findex data show that 80% of Indian adults now have a bank account, which is being celebrated as the success of the JDY. 
While the increase in the proportion of adults having bank accounts is indeed impressive (80% in 2017 from 53% in 2014), 48% of those who have an account in a financial institution made no withdrawal or deposit in the past one year.
An analysis:
  • Financial inclusion is not just about opening bank accounts, but also about using these accounts and providing access to formal credit. In fact, the major limitation of the JDY has been that while it has managed to get many people to open bank accounts, there is no commensurate increase in the use of these accounts, availability of formal credit, or savings in financial institutions, especially among the country’s marginalised and poorer sections.
  • Access to formal credit:
    As per various data and surveys, there is no sign of increased access to formal credit that the PMJDY is supposed to have ensured for its beneficiaries.
    Poor households in India, in the absence of access to formal credit, have to deal with moneylenders who charge exorbitant rates of interest. This is one of their biggest worries. 
    The Household Survey on India’s Citizen Environment and Consumer Economy, 2016 shows that while for the top 1% of the population, one in six are exposed to informal credit, within the poorest section of the population, the figure is four times as high, with two in three taking credit from informal sources. 
    Access to bank accounts seems to have had little effect on their dependence on private money lenders.
Conclusion:
The precarious conditions of indebtedness that poor people find themselves in has little signs of abating as a result of the JDY. Thus, more efforts needs to be made in this direction.
Connecting the dots:
  • PMJY has failed to promote financial inclusion. Critically analyze.

SOURCE:-  IAS baba

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