India’s Push for Financial Inclusion

02 February 2017
PMJDY offers a new approach to government-promoted financial inclusion that leverages new infrastructure and capabilities.
India's prime minister, Narendra Modi, launched a new program, dubbed the Prime Minister’s Jan Dhan Yojana (PMJDY), in August 2014. India has a long history of
government efforts to promote financial inclusion and, while some progress has been made, only about half of adults had bank accounts before PMJDY was launched (InterMedia 2016).
 
Building on what was already a large base of 53 percent of people over the age of 15 having a bank account (469 million) (World Bank 2014), this program led to the opening of 260 million accounts in just over two years. While there is some uncertainty around how many of these accounts were for first-time account holders, a survey conducted in mid-2015 indicates adult bank account ownership increased to 63 percent (InterMedia 2016). According to PMJDY, in 19 of 28 states all households have a bank account and in the remaining nine states over 99 percent of households have a bank account. This is consistent with an independent, large-scale, and nationally representative survey that shows 99 percent of households have at least one member with a bank account (Bhattacharya 2016).
 
While earlier financial inclusion efforts in India resulted in accounts not being serviced well and customers losing interest, PMJDY could be different. One early sign of this is that 76 percent (up from 55 percent in August 2015) of accounts have a balance greater than zero, and deposits totaled $6.74 billion in mid-October 2016. This received a massive push following Prime Minister Modi’s move on 8 November 2016 to withdraw the majority of currency notes in a move dubbed “demonetization.” Within a month of that move and as a result of people shifting cash into their accounts, deposits in PMJDY accounts surged to over $11 billion. While the sources of these deposits are unclear and the longer term implications unknown, the shift to date is notable (Shashidhar 2016).
 
 
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