PMJDY surpasses target before deadline

Posted on January 27, 2015 by Sumita Kale

The number of bank accounts opened under the PMJDY scheme exceeded its target of 7.5 crore households well before the 26th January deadline set by the PM.

As the Finance Minister summed it up,

Against the estimated target of opening bank accounts for 7.5 crore uncovered households in the country, as on date (17 th January 2015) Banks have opened 11.50 Crore accounts after conducting survey of 21.02 Crore households in the countryCoverage of 99.74% of the surveyed households has been achievedThe survey was conducted in about 2.27 Lakh Sub Service Areas (SSAs) in rural areas and wards in urban areas in a record time of 4 monthsOut of the accounts opened, 60% are in rural areas and 40% are in urban areasShare of female account holders is about 51%Rupay cards have been issued to more than 10 Crore beneficiaries who will get a benefit of personal accidental insurance of Rs1.00 Lac under the YojanaIn addition there is a life insurance cover of Rs.30,000/- for eligible beneficiariesA deposit of Rs9188 Crore has been mobilized in the accounts opened under PMJDY.

The reasons behind the success of the mission is that there has been very effective monitoring right from the Prime Minister's Office, regular review meetings with banks and coordination with the District authorities.

The present plan pursued digital financial inclusion with special emphasis on monitoring by a Mission headed by the Finance MinisterA mission office comprising of bankers, IT professionals and data analytic was set up for coordination, collation and follow up with various state governments, Banks and other stakeholdersThere was weekly monitoring of the efforts made by the Banks in PMJDYBanks organized account opening camps on every Saturday with a mega camp on last Saturday of the month form 8.00 A.Mto 8.00 P.Min coordination with District Authorities for opening of bank accountsFinancial literacy camps with a counter for Aadhar enrolment and insurance companies were also part of camps organized by the Banks.

As on 21st January, the number of new accounts stood at 12.01 croreThough 8.1 crore of these new accounts have no balance in them, the banking sector has mopped up Rs100 billion in deposit balancesThe public sector banks have pulled off this big feat, opening 944 lakh accounts, while Regional Rural Banks have opened another 209 lakh accountsThere are a number of challenges that do remainThe Indicus Policy Brief on PMJDY put forth these challenges:

Challenge Recommendation
The PMJDY target of new accounts opened can reveal a false picture of success. Effective monitoring is needed to measure true progress, going beyond just the number of accounts opened to track the number of accounts actually activated and transactions per accountDe-duplication of accounts must be initiated through Aadhaar seeding as much as possible.
The PMJDY norm of minimum Rs5000 monthly remuneration to agents is a welcome guideline for commercial viabilityHowever, it is unclear which bank/BC is actually paying this out to the agent, and what will be the recommended formula for fixed and variable components. With each bank/BC operating on different models of payouts, the RBI/DFS should standardize the criterion for ‘minimum payments including the fixed and variable components’ and track relevant metrics of payment flows along the channel to make sure that the agent receives adequate commission on time.
Aadhaar is the best enabler for ensuring de-duplication of accounts and linking to DBT. Legislation on Aadhaar and coverage of population must be speeded upYet, given current constraints on connectivity, use of One Time Passwords (OTP) must be allowed as an option to biometrics for DBT cash-out.
Customers as well as bank staff lack clarity on the overdraft facility. The eligibility and pricing of the credit overdraft facility need to be spelt out and communicated to the customers, branch level staff and agentsLeaving these operational issues to the discretion of the bank/ branch manager can impair the sustainability of this facility.It is important that the DFS clarifies the assumptions and costs of operating the Credit Guarantee Fund, for instance, whether the default risk cover is to be borne by the customer or bank, how to avoid mass defaults etc.
Banks and BC agents are not certain about the reimbursement process for DBT commissions. The DFS should clarify the process and turnaround time for reimbursing DBT commissions so that the payment flows can be planned to the last mile efficientlyBanks should provide credit limits for BCs against commissions accrued.
While the Finance Ministry has agreed to a 2% commission on DBT payments, at the state government level, this is not rationalisedAlso the 2% may not be adequate commission for DBT delivery in certain remote areas. There should be uniform guidelines on the commission for DBT payments across central and state schemes, and also equitable terms of sharing the commission between banks and BCsThe level of commission should also take into account the special requirements of pockets/regions that are difficult to access.
There is lack of clarity on the free insurance cover offered with the RuPay Card and its cost. The PMJDY needs to be transparent and upfront about the duration and expiry date of its ‘free insurance’ cover in order to avoid a loss of consumer confidence, which can erode all the benefits being targeted.

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