Financial inclusion is critical for poverty reduction as this helps in transferring the benefits of economic growth and development to the lowest strata of the population. Limited access to financial services among citizens also obstructs economic growth as it limits the new initiatives and developments.

While India had focused on financial inclusion in the past, its success was limited. Before 2014, only 50% adults had bank accounts. As per World Bank estimates, in 2014, India had 469 million bank accounts despite a population of >1.2 billion. Also, a majority of labourers working in the unorganised sectors and households below poverty line did not have bank accounts.

These limitations resulted in lukewarm success of government schemes in extending basic financial support to households and hence, the PMJDY was launched with renewed focus and objective to ensure maximum coverage of banking services across the country and demographics.

• Zero balance savings account can be opened with minimum documents
• No mandate to maintain any minimum balance in these accounts
• These accounts are like regular saving accounts and offer an interest on the deposit
• Accountholders also receives a RuPay debit card
• Accountholders can enroll for an accident insurance cover of Rs. 2 lakh (for accounts opened after 28.8.2018 and Rs. 1 lakh for accounts opened before this date)
• An overdraft facility of up to Rs. 10,000 (only eligible accountholders)
• Receive benefits of govt. schemes such as Direct Benefit Transfer (DBT), Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY), Atal Pension Yojana (APY) and the Micro Units Development & Refinance Agency Bank (MUDRA) scheme

In the past financial inclusion schemes, focus was on improving the reach of banking services at a village level. For example, in 2012, the govt. launched a financial inclusion programme to connect villages (with population of 2,000 or more) with banking services. Though this scheme added 74,000 villages to banking services, engagement of consumers was low, and many accounts did not record deposits or transactions.

Under the PMJDY, the aim is to create consumer interest in banking and improve the BFSI infrastructure. The PMJDY encourages use of banking by linking several govt. facilities with these accounts.

• Between April and June 2020, the Indian govt. released three tranches of US$ 1.3 billion each, to be directed to around 200 million women under the Pradhan Mantri Garib Kalyan Yojana
• In 2020, the govt. transferred Rs. 8 billion (US$ 109.3 million) through PMJDY accounts to the beneficiaries of Pradhan Mantri Awas Yojana
• 14 ministries and departments are routing their subsidy payments through 57 national programmes into PMJDY accounts

The govt. has also ensured the availability of banking agents at fixed points in each service area. This helped consumers access services as per their needs.

Another factor that contributed to the success of the scheme is simplifying account opening. Limited documentation and single form were the only requirements to open accounts under the PMJDY scheme. People with no ID documents can also open accounts with limitations of deposits, credit and withdraw limit.

To ensure successful implementation of the scheme, the govt. focused on streamlining the banking system by institutional collaboration and alignment of govt. departments with the scheme’s objectives.

Govt. departments such as the prime minister’s office (PMO) involvement was high since the scheme roll-out. Central govt. is the primary shareholder in large public-sector banks (PSBs) as well as the main sponsor of the scheme, which helped implement and execute the scheme across PSBs in the country. The scheme’s progress is monitored by the PMO through weekly video conference meetings with senior bureaucrats overseeing the programme. All banks are required to participate in these meetings and give presentations on numbers, key issues being faced and possible solutions.

The other factor which contributed to the scheme’s success is presence of large banking systems in the country. The Indian banking system is one of the largest in the world, comprising 12 public-sector banks, 22 private-sector banks, 45 foreign banks, 43 regional rural banks and numerous smaller cooperative banks. The scheme was channelled through all these institutions with the same requirements and offerings. This helped create unified communication with consumers and increase the reach of the scheme.

While all banks participated in the scheme, PSBs are the flag bearers with the highest share of accounts and deposits under the scheme. As of March 2024, PSBs accounted for 78% of all PMJDY deposits.

Also, the large scope of the scheme required an infrastructure which can sustain the KYC mandate. Availability of online biometric-based and digitally verifiable national identification system helped banks expedite account openings under the PMJDY. This infrastructure also helped in identifying the redundancies and ghosts to ensure the authenticity and credibility of services offered through these accounts.