The benefits that have accrued from this scheme extend beyond the bank account.
Over the past decade, there has been a concerted attempt by the government to bring the unbanked sections of the population into the ambit of the formal financial system. The launch of the Pradhan Mantri Jan Dhan Yojana in August 2014 was a significant step towards that end. As per the latest data, a staggering 53.1 crore accounts have been opened under the scheme. The Jan Dhan Yojana has not only helped narrow the gap in access to the formal banking system that existed between rural and urban areas — of all the accounts opened under the scheme, around 67 per cent are in rural/semi-urban areas — but has also helped bridge the gender gap. Roughly 56 per cent of the new account holders are women. The benefits that have accrued from this scheme extend beyond the bank account.
The acceleration in the pace of financial inclusion, coupled with the Aadhaar platform, the dramatic expansion in the use of mobile phones, and the reduction in telecom tariffs that have allowed millions to avail data services more cheaply have had far-reaching socio-economic and welfare implications. The JAM trinity (Jan Dhan, Aadhaar and mobile) has enabled the government to shift to a more efficient system for transferring benefits directly to beneficiaries. It has helped ensure more accurate targeting, while at the same time helping reduce leakages from the system. DBT is now being used in hundreds of schemes across various government departments and ministries — as per government data, total cumulative transfers amount to Rs 38.5 lakh crore. This architecture has also been used by the government to provide support to citizens during times of distress. For instance, during the initial days of the pandemic, the government had transferred Rs 500 to 20 crore women Jan Dhan account holders. The JAM framework also forms an integral part of the Unified Payments Interface which has transformed the payment systems in the country, leading to significant economic gains. In July, 14.4 billion transactions were processed through this platform as per data from NPCI. A significant share of these UPI transactions are of a lower ticket size — 85 per cent of peer to merchant and 56 per cent of peer to peer transactions are of less than Rs 500 — which indicates that the changes in the country’s payment systems have eased the ability of households, even low income ones, to engage in formal financial transactions in their daily lives.
The challenge for the banking system has been to manage the costs associated with the opening and servicing of these accounts. There is also a need to focus on financial products and services that are tailored to the needs of households at the lower end of the income distribution, keeping in mind their irregular and uncertain income streams and the lack of collateral. In this regard, the new architecture — Unified Lending Interface — could play a role in servicing the segments that are still left out.
