Context
The Pradhan Mantri Jan-Dhan Yojana (PMJDY), which revolutionised financial inclusion in India, has been in effect for nine years.
After nine years since its launch, the PMJDY, the largest financial inclusion campaign in the world, passed 500 million accounts, marking an important milestone.
 
What is financial inclusion? 
It is enabling affordable access to credit and financial services for disadvantaged communities. It is essential for prosperity and development in India. The ability to access a transaction account is a crucial step since it opens the door to other financial services by enabling storage, payments, and transfers.
 
About PMJDY. 
·         The Prime Minister formally debuted the Pradhan Mantri Jan Dhan Yojana (PMJDY) on August 15, 2014, during his speech commemorating Independence Day.
·         The PMJDY's main goal has been to promote financial inclusion on a national scale and guarantee that everyone, regardless of background or circumstances, has access to a variety of financial services.
·         The programme aims to provide financially disadvantaged groups in society with accessible banking services, savings and deposit accounts, remittance choices, credit facilities, insurance coverage, and pension benefits.
·         The government's goal in introducing the PMJDY was to use technology to cut costs, increase the accessibility of financial services, and end the nation's widespread cycle of financial exclusion.
·         The PMJDY has changed and improved over time, adding micro-insurance, overdraft services, micro-pensions, and micro-credit choices to its list of services. The programme has been successful in bringing millions of previously unbanked people into the established banking system, assisting in the financial empowerment and inclusion of many societal segments.
 
What are the Six Pillars of the Plan? 
·         All people have access to banking services: Banking and branch correspondents.
·         Basic savings bank accounts offer each qualified adult an overdraft facility of Rs. 10,000.
·         Programmes for financial literacy include encouraging saving, using ATMs, preparing for credit, obtaining insurance and pensions, and using simple mobile phones for banking.
·         The establishment of a Credit Guarantee Fund will give banks some protection against defaults.
·         Insurance: On accounts opened between August 15, 2014, and January 31, 2015, accident coverage of up to Rs. 1,00,000 and life coverage of Rs. 30,000 are available.
·         Plan for pensions in the unorganised industry.
 
Key approaches adopted under the PMJDY: 
·         The PMJDY switched from the previous approach of opening accounts offline with technology lock-in to accounts that are incorporated into banks' basic banking systems. It is now simpler for people to access their accounts and carry out transactions thanks to this improvement, which also increased account opening's efficiency and correctness.
·         Interoperability via RuPay Debit Cards or the Aadhaar-enabled Payment System (AePS): PMJDY adopted the usage of RuPay Debit Cards and the Aadhaar-enabled Payment System (AePS) to improve interoperability and accessibility. 
·         Fixed-point Business Correspondents: The plan acknowledged the value of BCs in getting to rural and neglected areas. Fixed-point BCs served as middlemen, offering fundamental banking services in locations that might not have actual bank branches. 
·         Simplified KYC / e-KYC: The PMJDY replaced the customarily onerous KYC processes with a simplified Know Your Customer (KYC) procedure known as e-KYC. E-KYC uses technology to electronically verify people's identity and addresses, minimising paperwork and facilitating account opening more quickly and widely.

Present status of the PMJDY:  
·         PMJDY Accounts: As of August 9, 2023, there are 50.09 crore (500.9 million) total PMJDY accounts. Women hold 55.6% of these accounts, or 27.82 crores, demonstrating the importance placed on gender equality. Most PMJDY accounts (66.7%, or 33.45 crores) are situated in rural and semi-urban areas.
·         Contributions to PMJDY Accounts: The total amount of deposits held in PMJDY accounts is Rs. 2,03,505 crore.
·         Regular Deposit into a PMJDY Account: As of August 16, 2023, the typical deposit per PMJDY account is Rs. 4,063. When compared to the typical deposit in August 2015, this represents an increase of more than 3.8 times. The increase in the average deposit is a sign that accounts are being used more frequently and that account holders are developing a saving habit.
·         RuPay Cards: PMJDY account holders have received a total of 33.98 crore (339.8 million) RuPay cards. RuPay cards have been issued and used more often over time.

Challenges:
·         Account Usage and Inactivity: Getting consumers to actively use their new accounts for transactions and savings is just as vital as getting them to open new ones. To overcome this obstacle, incentives, streamlined procedures, and awareness campaigns might be used.
·         Financial Education: Improving financial education is a long-term project. People can better comprehend banking services, manage their money, and make informed decisions by receiving easily understood financial education, workshops, and counselling.
·         Access to credit and services: Overdraft facilities are a good first step, but increasing access to credit and other financial services like insurance and pensions may need collaboration with financial institutions and product development that is specifically geared towards the needs of the low-income population.
·         Technology and Connectivity: Improving technological infrastructure, particularly in remote places, is necessary to address this difficulty. This might involve using government programmes like the Digital India campaign, mobile banking services, and digital literacy classes.

Way Forward:  
·         Encourage account use: Cashback rewards, discounts or exclusive offers can encourage regular account use and engagement. By partnering with local businesses to promote digital payments, a thriving ecosystem can be created that benefits users and merchants alike.
·         Expand financial services: Personalised financial products such as micro-insurance or micro-pensions are designed to meet the unique needs of unbanked people. These products need to be simple to understand and affordable so that they can be accessed by a broad range of individuals.
·         Digital infrastructure: Building digital literacy along with infrastructure is essential. By hosting digital literacy workshops and increasing mobile phone penetration, individuals can be empowered to use digital platforms to conduct financial transactions.
·         Partnerships: By partnering with fintech firms, we can create easy-to-use digital platforms and services that make financial transactions easier for users. Non-Governmental Organisations (NGOs) can also help by raising awareness of financial literacy and providing financial education.
 
Conclusion 
PMJDY’s initial success is just the start, and it’s important to address challenges and implement innovative strategies. PMJDY can be a driving force in building a more inclusive and resilient financial ecosystem in India. The success of the program lies in its ability to adapt and evolve to meet the evolving needs of the population that it seeks to serve.

LTX Mains Question:
Q. What are the main features of PMJDY and how does it contribute to financial inclusion? Highlight the challenges that the program has faced and propose potential strategies for the future of PMJDY?