Pradhan Mantri Jan Dhan Yojana

Nicked as PMJDY, which  is considered as the first major break through from the Namo led Government is the new buzz in the country. Before getting deep into it lets have a basic understanding about this scheme, but dont forget that all the details are not available yet, we only had a teaser lol!!

What is PMJDY

Its a scheme which encourage the people to open bank accounts and through which financial inclusion is realised.

Aims of the scheme in phases

Phase I (15^th August ,2014-14^th August,2015)

• Universal access to banking facilities
• Providing Basic Banking Accounts with overdraft facility of Rs.5000 after six months and RuPay Debit card with inbuilt accident insurance cover of Rs. 1 lakh and RuPay Kisan Card
• Financial Literacy Programme

Phase II (15^th August 2015-15^th August,2018)  

• Creation of Credit  Guarantee Fund   for coverage of defaults in overdraft  A/Cs
• Micro Insurance
• Unorganized sector Pension schemes like  Swavlamban.                                                     

How its done ?

• All the rural & semi urban areas of the country is proposed to be mapped into Sub Service Area (SSA) comprising 1000-1500 households with an average 3-4 villages with relaxation in NE/ Hilly states.

• It is also proposed that looking to the viability of each centre around 74000 villages with population more than 2000 which were covered by Business Correspondents under Swabhiman Campaign will be considered for conversion into full fledged Brick & Mortar branches with staff strength of 1+1/1+2 in the next three years.
•      All the 6 lakh villages across the entire country are to be mapped according to the Service Area of each Bank to have at least one fixed point Banking outlet catering to 1000 to 1500 households, called as Sub Service Area (SSA)
• It is proposed that SSAs shall be covered through a combination of banking outlets i.e branch banking and branch less banking. Branch banking means traditional Brick & Mortar branches. Branchless banking comprises of fixed point Business Correspondents agents, who act as representative of Bank to provide basic banking services.   

 Analysis  

I consider this as a good move by Mr Modi , even though this is called as the backdoor entry of Adhaar card, this is much better than that because this scheme has a well defined objective and sets its target and aggressive implementation place this scheme a step ahead of Adhaar scheme.

•  Even if this didn't achieve the desired result, still  it will be revolutionary to bring in people under the financial net which will be very beneficial in the long run, the main dream of  converting  cash economy into a cashless and digital economy will be made possible.
  
• the weaker section especially the women will be empowered through this scheme, given the affinity  of the Indian towards savings will be utilized for greater cause.
  
  
• this might reduce the people falling in the traps of money lenders and the Backward and tribal areas will be definitely benefited.
  
  
• Under 10 % of the people of India is under insurance cover , this scheme will help to bring the people under insurance cover and help them in unforeseen events
  
  
• financial literacy of the country will improve and people participation in the financial activities will increase. Banking will be  no more a myth and as rightly said by our PM "  It will be the beginning of the end of financial untouchability in India "   
• In future it is known that all the welfare schemes will be linked to this account and it will prevent the leakages and this avoid the exploitation of the brokers and middleman. 

Downside

• In the paper this scheme looks brilliant and promising but just like other plans , Its success also depends on how well it is executed and manged. This scheme is having many challenges before it, lets look into them
• In the last UPA regime Direct cash benefit scheme and some steps for financial inclusion had created thousands of New bank accounts in which at least half of them is dormant now, since the operating cost of the account has shooted up, the mere increase in dormant account without a decent flow will make a negative impact in the banking sector and the burden will add more burden to the exchequer which is already in vulnerable condition. The Non Performing Assets and Bad debts will put the industry in trouble.
  
• Another biggest challenge is to make them people fully aware of this scheme and making them a financial literate, with a considerable amount of people is still illiterates, making them aware of basic banking is the key for the success of the projects. The banks should not focused in opening accounts in large number instead it should focus on increasing the awareness.
• Demand Supply Gap. For the set target the current infrastructure of the banking is not sufficient to provide the desired service or results,  new branches, new ATM centers, new Business correspondents all has to be increased  by a considerable margin ,and it all requires huge investment and if they didn't pay off it will set off serious consequences.
• Lack of clarity in certain areas, such as financial viability of maintaining large number of accounts, the yet to prove business correspondance model, and source where the funds would be diverted from to finance it. Some news reports suggest that the overdraft facility will be guaranteed by an Rs 1,000 crore fund from NABARD. But this may not be sufficient if the overdraft facility really takes off.
  
  
  
  
  Conclusion
  
  
  As we hope for the best for this aggressive scheme lets not forget the challenges it pose and I also believe that the experts panel find  the loopholes and plug them as soon as possible and frame it more efficiently . In the mean while we as responsible citizen promote this scheme and help other to understand this scheme and make the dream of Digital economy comes true.