Financial Inclusion and the Pradhan Mantri Jan Dhan Yojana (PMJDY)

On August 6, Reserve Bank of India (RBI) Governor emphasized the importance of serving the interests and welfare of all citizens, focusing especially on those at the bottom of the pyramid. He announced initiatives aimed at enhancing financial inclusion, including re-KYC processes for Jan Dhan accounts and promoting micro-insurance and pension schemes.

Re-KYC and Account Management

• Re-KYC is crucial for keeping customer information up-to-date, ensuring security and compliance.
• Banks are organizing camps from July to September for re-KYC and to facilitate micro insurance and pension schemes.
• Jan Dhan accounts require re-KYC every ten years. 
• Many accounts, opened initially after the PMJDY launch on August 28, 2024, have become dormant and need activation.
• Dormancy occurs when accounts are inactive for over a year, necessitating a transaction to revive them.

Historical Context and Banking Expansion

• India's formal banking network expanded significantly post-Independence. 
• Nationalization of banks in 1969 and 1980 brought 91% of the industry under government control.
• Before nationalization, banking services were mostly inaccessible to a large segment of the population.

Impact of the PMJDY

• Launched on August 15, 2014, the PMJDY aimed to provide affordable access to financial services.
• Achieved a Guinness World Record by opening 15 million accounts on its inauguration day.
• By August 2025, 561 million PMJDY accounts had been opened, collectively holding Rs 2.64 trillion.
• Public sector banks hold the majority of these accounts, followed by regional rural banks, private banks, and rural cooperative banks.

Demographic Insights and Technology Integration

• 66.75% of PMJDY accounts are in rural and semi-urban areas; women beneficiaries outnumber men.
• The Jan-Dhan-Aadhaar-Mobile (JAM) trinity has transformed Indian banking by facilitating direct benefit transfers (DBT).
• DBT schemes increased from 28 in 2013-14 to 323 in 2024-25, with funds transferred rising significantly from Rs 7,400 crore to nearly Rs 7 trillion.

Challenges and the Path Forward

• 21.17% of PMJDY accounts were inactive as of January 2025, partly due to factors like rural-urban migration and multiple accounts per person.
• Concerns about account misuse for illegal activities, like money laundering, have been raised.
• Operational costs for inactive accounts are a burden on banks.
• Insurance coverage under PMJDY schemes is extensive, yet awareness remains low.

Despite challenges, PMJDY has been a catalyst for financial inclusion, though rural income growth and job creation are essential for sustained account activity.