In the last 10 years, India has made major progress in deploying cost-saving and efficient digital technologies to provide financial services to the underprivileged sections of society.
According to the NPCI data, in October 2024, UPI, which is a key driver of India’s digital payment ecosystem, processed 16.58 billion transactions worth ₹23.50 trillion. Over 53 crore bank accounts have been opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY), contributing to the foundation of India’s financial inclusion journey.
On the sidelines of Global Inclusive Finance Summit 2024, hosted at Hotel Ashok, on August 11, ETGovernment had an exclusive conversation with Parshant Kumar Goyal, Joint Secretary, Department of Financial Services, Ministry of Finance, Government of India. What follows are the excerpts from the conversation between Parshant Kumar Goyal and Anoop Verma, Editor-News, ETGovernment, The Economic Times.
Edited excerpts:
The Pradhan Mantri Jan Dhan Yojana was launched in 2014. How do you view the performance of the Yojana in the 10 years of its existence?
In the last 10 years, the Pradhan Mantri Jan Dhan Yojana has achieved tremendous success in reaching out to the unbanked or the financially underserved sections of the population. Close to 54 crore accounts have been opened under the scheme. We are opening about 3 crore accounts every year. If we go by the data from NPCI Mapper, we find that between 83 crore to 84 crore bank accounts are linked to independent Aadhaars. There are also a large number of bank accounts which are not linked to Aadhaar due to various reasons. It is safe to assume that close to 84 crore people have access to bank accounts. When people are connected to the banking system they can be provided a host of financial services and benefits. PMJDY has become the cornerstone of India’s journey towards achieving financial inclusion.
What are the key challenges that the movement of financial inclusion in India faces?
The big challenge of financial inclusion is how we provide inclusive financial services to the 8% to 10% of the people in the country who continue to be left out of the banking system. How do we identify the people who do not have access to bank accounts? How do we reach out to them and motivate them to open a bank account? We need to explore for better answers to these critical questions. Summits such as the Global Inclusive Finance Summit 2024, which we have attended today, can lead to the generation and exchange of insights and information on what exactly can be done to provide banking services to all in the country and, thereby, further expand the scope of financial inclusion in the country. There have been some media reports on the inoperative accounts in the Pradhan Mantri Jan Dhan Yojana. Is the issue of inoperative accounts a big challenge?
The number of inoperative accounts in the PMJDY is about 20%. This might sound like a big anomaly, which in a sense it is, but in context of the overall banking system, it probably isn’t. When we examine the data with Current Account Savings Accounts (CASA), we find that about 20% of the accounts are inoperative. The inoperative status might be due to people opening new accounts and forgetting about the earlier ones. But there could be some people who have only one account which becomes inoperative. If this is the case, then it can be assumed that the owner of the inoperative account did not see any value in the banking system. The question is: How to motivate such people? One way would be to provide more services to the account holders – like the facility of small loans, insurance and other incentives. Maybe with new technology and new innovations, the reach of formal financial services can be enhanced.
One of the goals of India’s financial inclusion journey is to empower women, particularly in the rural areas. How do you see the role played by Pradhan Mantri Jan Dhan Yojana in empowering rural women?
A majority of the accounts opened under the Pradhan Mantri Jan Dhan Yojana are with women in rural areas and smaller towns. This clearly shows that there was a need for banking services for women. Pradhan Mantri Jan Dhan Yojana has been successful in fulfilling this need. Having a bank account is a source of empowerment to the women – now they have the means to save their own money and exercise their own discretion in spending it. In addition to this, when women have access to bank accounts, they can also avail of micro or small loans for funding their small enterprise or taking care of any other expense.
The Pradhan Mantri Jan Dhan Yojana is to a large extent driven by new banking systems and digital technologies. The Digital Public Infrastructure and systems like UPI that India has developed are enabling a much larger section of society to enter the fold of formal banking. Now AI and other emerging technologies are leading to seminal transformations in the banking systems. What kind of impact can AI have on financial inclusion?
As far as the opening of accounts is concerned, we are on track to achieving the coverage of almost the complete adult population of the country. Perhaps if we take a data driven approach, we can detect the people who are left out of the banking system. AI can analyze the data and identify the unbanked. With a data driven approach, the reach of not just banking but also microcredit, insurance and other banking services can be enhanced. AI and other emerging technologies must be used to take banking services to every household in the country.
