JAN-DHAN-YOJANA AND FINANCIAL INCLUSION

A study of Pradhanmantri JAN-DHAN-YOJANA with respect to current situation of financial inclusion in India. ******************************************************************************** ******************************************************************************** Objectives:- ******************************************************************************** 1) To Study present scenario of the financial inclusion in India ******************************************************************************** 2) To study the problems and challenges faced during providing financial services. ******************************************************************************** 3) To analyze the measures taken by the government and banks for financial inclusion. ******************************************************************************** 4) To Analyze the Jan Dhan Yojana initiated by the government. ******************************************************************************** ******************************************************************************** RESEARCH METHODOLOGY:- ******************************************************************************** Research Methodology is a way to systematically solve the problems. It may be understood to study how research is done scientifically. In this, we study various steps that are generally adopted by the researcher in studying research problems along with the logic behind them, to understand why we are using particular method of technique so that the research results are capable of being evaluated.I have used a lot of data to understand the concept of financial inclusion and to study different type of financial inclusion . The data collected was interpreted and then used as information in project. During my project, I collected data through various sources primary & secondary. ******************************************************************************** Primary source includes :-. ******************************************************************************** 1) Discussion with branch managers of various Banks 2 )Discussion with experts 3) Discussion with people and customers of bank . Secondary source includes :- 1) Various books related to financial inclusion. 2) Getting information from web sides of various Banks. 3) Web sites were used as the vital information source ex. RBI bank. ******************************************************************************** Meaning of term financial inclusion(FI) ******************************************************************************** The recent developments in banking technology have transformed banking from the tradition brick-and-mortar infrastructure like staffed branches to a system supplemented by other channels like automated teller machines (ATM), credit/debit cards, internet banking, online money transfers, etc. The moot point, however, is that access to such technology is restricted only to certain segments of the society. Indeed, some trends, such as increasingly sophisticated customer segmentation technology – allowing, for example, more accurate targeting of sections of the market – have led to restricted access to financial services for some groups. There is a growing divide, with an increased range of personal finance options for a segment of high and upper middle income population and a significantly large section of the population who lack access to even the most basic banking services. This is termed “financial exclusion”. These people, particularly, those living on low incomes, cannot access mainstream financial products such as bank accounts, credit, remittances and payment services, financial advisory services, insurance facilities, etc. Causes of financial exclusion . •Terms & condition. Different types of terms &conditions imposed by the banks often deter people with low income &rural areas from opening bank account, in Canada , USA , France & India strict regulation is imposed on opening balance and minimum balance required for opening an account. This often goes beyond the budget of the low income people . Another area of obstacle is the conditions relating to the use of accounts. In Belgium for instance , accounts have been closed beyond the budget of the low income people. •Identity requirements. •Physical requirements. •Bankers approach . ******************************************************************************** Effects of financial exclusion : ******************************************************************************** Living without financial services and products is the disadvantageous when the contemporary world is moving on cashless system depending on credit cards , debit cards, ATMs & core banking solution (CBSs) . exclusion is much greater when the excluded lot. The implication of the financial exclusion is much greater when the exclusion mass is entrapped in the hydra headed cycles of poverty. This causes further social exclusion which is very much detrimental for the equitable growth of the world community . ******************************************************************************** The following points describe disadvantages to the financially excluded mass: ******************************************************************************** 1. They pay higher charges in the absence of financial transaction like money transfer & cheque cashing etc. 2. They take credit from non-institutional creditors at exorbitantly higher rate which exacerbate the harm already cause due to poverty . 3. Lack of security in holding & storing money. 4. The small business may suffer due to loss of access to middle class and higher-income consumers, higher cash handling costs and delays in remittances of money. 5. General decline in investments. 6. Increase in unemployment . Who are the excluded :-The financially excluded sections largely comprise of a. Marginal farmers b. Landless laborers c. Self employed and unorganized sector enterprises d. Urban slum dwellers ******************************************************************************** Benefits of financial inclusion ******************************************************************************** • Growth with equity : In the path of super power we the Indians will need to achieve the growth of our country with equality . It is provided by inclusive finance. • Get rid of poverty : To remove poverty from the Indian context all everybody will be given access to formal financial services . Because if they borrow loans for business or education or any other purpose they get the loan will pave way for their development . • Financial Transactions Made Easy : Inclusive finance will provide banking related financial transactions in an easy and speedy way . • Safe savings along with financial services : People will have safe savings along with other allied services like insurance cover , entrepreneurial loans , payment and settlement facility etc, Tools of financial inclusion and the methods to achieve them ******************************************************************************** Financial Inclusion Includes Accessing Of Financial Products and Services Like, ******************************************************************************** • Savings facility • Credit and debit cards access • Electronic fund transfer • All kinds of commercial loans • Overdraft facility • Cheque facility • Payment and remittance services • Low cost financial services • Insurance (Medical insurance) Recent data shows that countries with large proportion of population excluded from the formal financial system also show higher poverty ratios and high inequality. ******************************************************************************** Indian scenario:- ******************************************************************************** • Indian banking system has exhibited tremendous growth in extending its reach , coverage and delivery of financial products to the mass ever since 1881. The all Indian rural servy committee in 1954 recommended the creation of a state sponsored bank to promote rural penetration . accordingly, SBI was established in 1955 . another step in this direction was taken in 1969 when 14 major commercial banks were nationalized followed by six more in 1980 . This strengthened the concept of socialistic and welfare state stature of the country . lead bank scheme was lauched in 1070 to increase banking the skills of commercial banks with the emeregence of RRBs in 1976 the skills of commercial banks with the grass root presence of the co-operative banks helped the mass to access to nsititutional credit .NABARD established in 1982 regulated institutional credit for agriculture and rural development , talwar committee and goiporia committee in the early eighties have made many recommendations to improve the customer services in India . following are of some of the step undertaken by RBI: • The RRBs have been advised to allow limited overdraft facilities in no-frill accounts without any collateral. The idea was that provision of such overdraft facilities provides a ready source of funding to the account holders who are thereby inducted to open such accounts. • Banks also have been advised to provide a general purpose credit card(GCC) at their rural and semi urban branches . from this revolving card system the customer can withdraw money to a limited amount from this concerned branch. • Bhumiheen credit card facility has been arranged apart from kisan credit cards for the rural and semi urban frmers , landless laborers’ whereby they can be allowed hassle free credit limit up to 0.25 lac per person . • Special agricultural branches have been opened by the PSBs to meet the financial needs fore agricultural & allied activities . ******************************************************************************** 'Pradhanmantri Jan-Dhan Yojana:- ******************************************************************************** The JAN-DHAN-YOJANA- programme is Prime Minister's first blockbuster social upliftment scheme. Today only 58.7 per cent of the households in the country have access to banking services. Prime Ministerdeclared that a bank account for each household was a "national priority" The Prime Minister said people in the country have mobile phones but do not have bank accounts, and this scenario needs to be changed."It's an innovative and much-needed step in the right direction that will address the biggest national challenge — eradication of poverty — through ******************************************************************************** financial inclusion:- ******************************************************************************** This scheme will help to integrate the poorest of the poor with bank accounts with 'Pradhanmantri Jan-Dhan Yojana. Objective of the scheme is covering all households in the country with banking facilities, and having a bank account for each household. The propensity to spend cash that is in hand is much higher compared with money in a bank account The scheme is expected to boost insurance penetration in India.There is an urgency to this exercise as all other development activities are hindered by this single disability. This is an important step towards converting Indian economy into a cashless and digital economy. This scheme is aimed at improving the lives of millions of India's poor by bringing them into the financial mainstream and freeing them from the clutches of usurious moneylenders, while giving them a modicum of insurance cover. Accounts are going to be active by adequate float funds in that - in the sense that the accounts are going to be having credits.Under the programme, people will be able to open zero-balance accounts with any bank, either public or private. An Aadhaar card is proof enough to open your Jan Dhan account on the spot. The government would eventually want to provide direct benefits transfer through these accounts, a measure it feels can help curb corruption by plugging leakages. By paying benefits directly into bank accounts, the scheme could cut waste and corruption that inflate India's $43 billion subsidy bill, equivalent to more than 2 percent of its GDP, for handouts of grain, fuel and fertiliser. On the inauguration day, 1.5 Crore (15 million) bank accounts were opened under this scheme. With the rapid financial inclusion, the usage of cash would decline in the country in line with the developed countries. In the next phase of this Scheme micro insurance & pension etc. will also be added ******************************************************************************** Five important features of the PM Jan Dhan Yojna ******************************************************************************** 1. Under the scheme, account holders will be provided zero-balance bank account with RuPay debit card, in addition to accidental insurance cover of Rs 1 lakh. 2. Those who open accounts by January 26, 2015 over and above the Rs1 lakh accident, they will be given life insurance cover of Rs 30,000. 3. Six months of opening of the bank account, holders can avail Rs 5,000 loan from the bank. 4. With the introduction of new technology introduced by National Payments Corporation of India (NPCI), a person can transfer funds, check balance through a normal phone which was earlier limited only to smart phones so far. 5. Mobile banking for the poor would be available through National Unified USSD Platform (NUUP) for which all banks and mobile companies have come together. ******************************************************************************** Findings:- ******************************************************************************** 1. In Rural areas 45% of the household are not using the financial services to that of 32% in Urban areas. 2. Total 1,02,343 Bank branches are functioning in the country can be used for financial inclusion. 3. Average population per bank branch is 12,100 which has to be reduced by adding more branches. 4. The MFIs (Micro Financial Institutions) need to function under and be held answerable to clear RBI regulations 5. There is need to have financial inclusion regulation in our country. 6. Financial inclusion should be taken as a business prospect rather than compulsion ******************************************************************************** Conclusion:- ******************************************************************************** 1. A substantial part 35-40% of the rural populations does not have bank accounts so benefits and government schemes are not reaching them so opening bank account should be top priority. 2. Effective implementation of JAN-DHAN-YOJANA will drastically reduce the poverty, solving most of the financial problems of people. 3. Benefits of financial inclusion schemes should be properly communicated to all rural areas of the country. 4. Government should first define the financial inclusion regulations/acts for the country. 5. All the Financial institutions should make participate and include for effective implementation of financial inclusion. ******************************************************************************** References: ******************************************************************************** 1. Dr. Christabell. P. J. 2Vimal Raj. A (Sep-Oct. 2012). Financial Inclusion in Rural India: The role of Microfinance as a Tool. IOSR Journal of Humanities and Social Science (JHSS) , 21-25. 2. Commemorative Lecture by Shri V.Leeladhar, Dy.Governor, Reserve Bank of India on 'Financial Inclusion' at the Fedbank Hormis Memorial Foundation at Ernakulam on December 2, 2005. 3. http://www.allbankingsolutions.com/Articles/Articles-AB-Financial-Inclusion.htm 4. http://www.rbi.org.in/home.aspx 5. http://en.wikipedia.org/wiki/Financial_inclusion 6. Financial Inclusion Taskforce : Report on progress towards the shared goal. 7. http://financialservices.gov.in/banking/financialinclusion.asp --