Financial Inclusion and PM Jan Dhan Yojana

Phase II-

Paper- Finance and Management (Optional)

Topic: Financial Inclusion

What is Financial Inclusion?

Financial inclusion or inclusive financing is the delivery of financial services at affordable costs to sections of disadvantaged and low-income segments of society, in contrast to financial exclusion where those services are not available or affordable.

It means that everyone is given access to:

  • Banking
  • Credit
  • Investment
  • Insurance

With a bank account, every household gains access to banking and credit facilities.

This will enable them to come out of the grip of moneylenders, manage to keep away from financial crises caused by emergent needs, and most importantly, benefit from a range of financial products/benefits.

Current status of financial inclusion in the country:

Various initiatives were taken up by RBI / GoI in order to ensure financial inclusion.

These include initiaatives like:

  • Nationalization of Banks ,
  • Expansion of Banks branch network ,
  • Establishment & expansion of Cooperative and RRBs ,
  • Introduction of Priority Sector lending ,
  • Lead Bank Scheme,
  • Formation of SHGs etc

During 2005-2006, RBI advised Banks to align their  polices with the objective of financial Inclusion.  Further, in order to ensure greater financial inclusion and increasing the outreach of the banking sector, it was decided to use the services of NGOs/SHGs, MFIs and other Civil Society Organizations as intermediaries in providing financial and banking services through use of “Business Facilitator and Business Correspondent Model”.

However, as per Census, 2011:

·         Out of 24.67 crore households in the country, 14.48 crore (58.7%) households had access to banking services.

·         Of the 16.78 crore rural households, 9.14 crore (54.46%) were availing banking services.

·         Of the 7.89 crore urban households, 5.34 crore (67.68%) households were availing banking services.

·         In the year 2011, Banks covered 74,351 villages, with population more than 2,000 (as per 2001 census), with banking facilities under the “Swabhimaan” campaign through Business Correspondents .

However the program had a very limited reach and impact.

  • The mission mode objective of the PMJDY consists of 6 pillars.
  • During the 1st year of implementation under Phase I (15th August, 2014-14th August,2015), three Pillars namely(1)Universal access to banking facilities (2) Financial Literacy Programme and (3) 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, will be implemented.
  • Phase II, beginning from 15th August 2015 upto15th August,2018 will address (1) Creation of Credit  Guarantee Fund   for coverage of defaults in overdraft  A/Cs (2)  Micro Insurance and (3)  Unorganized sector Pension schemes like  Swavlamban.
  • In addition, in this phase coverage of households in hilly, tribal and difficult areas would be carried out.
  • Moreover, this phase would focus on coverage of remaining adults in the households and students.
  • The plan, therefore, proposes to channel all Government benefits (from Centre/State/Local body) to the beneficiaries to such accounts and pushing the Direct Benefits Transfer (DBT) scheme of the Union Government including restarting the DBT in LPG scheme. MGNREGS sponsored by Ministry of Rural Development (MoRD, GoI) is also likely to be included in Direct Benefit Transfer scheme.



  • Households are being targeted instead of villages as targeted earlier.
  • Moreover both rural and urban areas are being covered this time as against only rural areas targeted earlier.
  • The present plan pursues digital financial inclusion with special emphasis on monitoring by a Mission headed by the Finance Minister.
  • Account can be opened in any bank branch or via Business Correspondent (Bank Mitra)
  • Such accounts can be opened with zero balance.
  • The deposits will earn interest, an accidental insurance of Rs 1 lakh will be provided along with a life insurance cover of Rs 30,000.
  • The beneficiaries of various government schemes will get subsidies in cash in their accounts directly. (Direct Benefits Transfer or DBT)

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