Pradhan Mantri Jan Dhan Yojana (PMJDY) History, Benefits And Eligibility

Pradhan Mantri Jan Dhan Yojana (PMJDY)

The Pradhan Mantri Jan Dhan Yojana (PMJDY) is a national initiative introduced by the Government of India in 2014 to bring financial services to the underserved and unbanked population. This successful scheme has seen the opening of over 400 million accounts. In this article, we'll explore the features and importance of PMJDY, providing valuable insights for your Banking Exam Preparation.

What is Pradhan Mantri Jan-Dhan Yojana (PMJDY)?

Pradhan Mantri Jan-Dhan Yojana (PMJDY) is a government program launched in 2014 with the goal of ensuring universal access to banking services.

Pradhan Mantri Jan Dhan Yojana Overview

Pradhan Mantri Jan Dhan Yojana (PMJDY) History

Pradhan Mantri Jan Dhan Yojana (PMJDY) introduced on August 28, 2014, PMJDY aimed to achieve widespread banking access, aspiring to have at least one basic savings bank account for every household.

The launch of PMJDY was in response to the limited financial inclusion in India at that time, where only 53% of adults had a bank account in 2014. This initiative sought to bridge the gap and offer banking services to all Indians, regardless of their income or social standing. PMJDY incorporated attractive features to encourage account holders.

The scheme experienced tremendous success in its initial years, witnessing the opening of over 200 million new bank accounts within the first year. PMJDY has played a crucial role in enhancing financial literacy in India, contributing to a notable increase in awareness of basic financial concepts, as revealed by a World Bank study.

Principles of Pradhan Mantri Jan Dhan Yojana (PMJDY)

1. Banking Inclusion : Ensuring access to basic savings accounts for everyone with minimal paperwork, simplified KYC requirements, e-KYC, zero balance, and no charges.
2. Financial Security : Providing indigenous debit cards for cash withdrawals and payments at merchant locations, accompanied by free accident insurance coverage of Rs. 2 lakhs.
3. Empowering the Underprivileged : Introducing additional financial products such as micro-insurance, overdrafts for consumption, micro-pension, and micro-credit to support those with limited financial resources.

Key Components of Pradhan Mantri Jan Dhan Yojana (PMJDY)

1. Universal Banking Access: Ensuring universal access to banking facilities for every household.
2. Basic Savings with Overdraft: Providing basic savings bank accounts for households with an overdraft facility of Rs. 10,000.
3. Financial Literacy at the Village Level: Implementing a Financial Literacy Program at the village level to enhance financial awareness.
4. Credit Guarantee Fund: Establishing a Credit Guarantee Fund to cover defaults in Overdraft Accounts.
5. Insurance Benefits: Offering insurance coverage, including accident cover up to Rs. 1,00,000 and life cover of Rs. 30,000 for accounts opened between 15 Aug 2014 to 31 Jan 2015.
6. Pension Schemes for Unorganized Sector: Introducing pension schemes like Swvlamban through Business Correspondents for the unorganized sector.

Implementation Phases of Pradhan Mantri Jan Dhan Yojana (PMJDY)

• Phase I (15 Aug 2014 – 14 Aug 2015): Focus on universal banking access, opening accounts with RuPay debit cards, providing accident insurance, and conducting financial literacy programs.
• Phase II (15 Aug 2015 – 14 Aug 2018): Concentration on extending microinsurance and pension schemes to the unorganized sector through Business Correspondents.
• Phase III (after 14 Aug 2018): Expanding PMJDY coverage by increasing overdraft limits, revising age limits, and enhancing insurance coverage for new RuPay card holders.

Pradhan Mantri Jan Dhan Yojana (PMJDY) Eligibility Criteria

• Must be at least 10 years old.
• Resident of India with an Aadhaar card (alternative documents accepted).
• No existing bank account; previous account closure required.

Significant Features Pradhan Mantri Jan Dhan Yojana (PMJDY)

• World's Largest Financial Inclusion: Recognized as the world’s largest financial inclusion initiative.
• Overdraft Service: Offers an overdraft service, allowing account holders to borrow more than the available balance.
• National Mission for Financial Inclusion: Aims to provide low-cost access to various financial services.
• Direct Benefits Transfer (DBT): Lays the foundation for DBT, reducing subsidy leakages and saving government funds.
• Guinness Book of World Records: Acknowledged by the Guinness Book of World Records for the fastest establishment of bank accounts during a Financial Inclusion Campaign.

Pradhan Mantri Jan Dhan Yojana (PMJDY) Benefits

• Access to Basic Savings: Provides access to a basic savings account for individuals.
• No Minimum Balance Requirement: PMJDY accounts do not necessitate maintaining a minimum balance.
• Interest on Deposits: Deposits in PMJDY accounts earn interest for the account holder.
• Rupay Debit Card: Account holders are issued a Rupay Debit card for transactions.
• Direct Benefits Transfer (DBT): Government program benefits are directly transferred to PMJDY accounts.
• Overdraft, Pension, and Insurance: After 6 months of satisfactory account management, users gain access to overdraft facilities, as well as pension and insurance products.
• Life Insurance Policy: A life insurance policy of Rs. 30,000 is provided to PMJDY account holders.
• Easy Money Transfer: Facilitates easy money transfer across India.
• Accidental Insurance Coverage: To qualify for Accidental Insurance Coverage, the RuPay Debit Card must be used at least once every 45 days.
• Overdraft Eligibility: Only one account per household, preferably belonging to the lady of the house, is eligible for an overdraft of up to Rs. 5,000.

Achievements Under Pradhan Mantri Jan Dhan Yojana

• Increase in Financial Inclusion: The scheme has significantly increased financial inclusion in India, with bank accounts rising from 53% in 2014 to 80% in 2023.
• Gender Inclusivity: The PMJDY has contributed to narrowing the gender gap in financial inclusion, with the percentage of women with bank accounts rising from 35% in 2014 to 77% in 2023.
• Enhanced Access to Credit: Access to credit for the poor and marginalized has increased, with loans disbursed under PMJDY rising from 1.1 crore in 2015 to 31.2 crore in 2023, along with reduced interest rates.
• Poverty Reduction: The PMJDY has played a role in reducing poverty, lifting 1.5 crore people out of poverty according to a World Bank study, and contributing to a reduction in the inequality gap in India.
• Other Achievements: Increased access to insurance, pension schemes, enhanced financial literacy, and a rise in digital payments are additional successes attributed to PMJDY.

Pradhan Mantri Jan-Dhan Yojana Moving Forward

The Pradhan Mantri Jan Dhan Yojana (PMJDY) has witnessed significant success since its initiation in 2014. However, avenues for enhancement remain. Here are suggestions for the path ahead:

1. Continued Emphasis on Financial Literacy: The government should persist in prioritizing financial literacy programs. These initiatives aim to educate account holders on their rights and responsibilities, empowering them to utilize their bank accounts judiciously and avoid potential debt pitfalls.
2. Advocacy for Digital Payments: Encourage and endorse digital payments to diminish reliance on cash. This strategic move intends to heighten the convenience and efficiency of financial transactions for account holders.
3. Augmented Access to Credit: Facilitate increased access to credit, particularly for Micro, Small, and Medium Enterprises (MSMEs). This approach will fortify the growth of businesses, contributing to job creation.

4. Collaboration for Cost Reduction in Banking Services: Collaborate closely with banks to curtail the cost of banking services for account holders. Such collaborative efforts will render banking more economically viable and accessible to a broader spectrum of the population.