Indian Economy (issues re: planning, mobilization of resources, growth, development, employment); Inclusive growth and issues therein
In News: PM Jan Dhan Yojana has accelerated financial inclusion, reduced inequalities
Elaborate on the impact of Pradhan Mantri Jan-Dhan Yojana (PMJDY) on financial inclusion. Suggest steps to address the current barriers to financial inclusion.
Pradhan Mantri Jan Dhan Yojana (PMJDY) was launched to provide financial services to all citizens, regardless of their socio-economic status.
The scheme ensures access to a range of financial services such as availability of basic savings bank account, access to need based credit, remittances facility, insurance and pension.
Impact of Pradhan Mantri Jan-Dhan Yojana:
- PMJDY has brought millions of people into the formal banking system. According to NSSO, nearly 90% of those aged 18 and above had access to an account at a formal financial institution in 2020-21.
- Bridged urban rural gap:It has created millions of new bank accounts, particularly in rural areas, and has enabled account holders to make transactions digitally
- The gender gap in account ownership has been significantly reduced through the basic savings bank deposit accounts aimed at individuals
- It has enabled the government to transfer subsidies and benefits directly to the bank accounts of beneficiaries. This has reduced leakages and delays and has contributed to the overall efficiency of government programs.
Interventions to address the current barriers to financial inclusion:
- There is a need to strengthen the ecosystem and enablers that drive financial inclusion.
- focus on promoting private-sector involvement in financial inclusion
- Strengthen financial capabilities of individuals in financial services through incubation and financial literacy programs.
- There is a need to increase penetration of financial products and services like micro-insurance and credit in a cost-effective manner. The recently launched Unified Lending Interface will be a game changer in providing credit-products in this line.
- There is a need to focus on strengthening the consumer protection framework to maintain the trust of consumers in new and complex digital products.
- As many of them have seasonal and erratic income streams, a customer-centric product design, taking into consideration the lifecycle needs of customers at every stage is needed.
- Future government programmes can explore the interlinkage of PMJDY accounts with beneficiaries of other government schemes to have a holistic approach to continued economic empowerment at the bottom of the pyramid.
By addressing the key challenges and continuing to innovate, PMJDY has the potential to transform the financial landscape of India and drive further economic growth and development.
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