Five Years Of Jan Dhan Yojana: About 20% Of Accounts Lying Dormant

The Pradhan Mantri Jan Dhan Yojana, launched five years ago on Aug. 15, 2014, has proved to be a success in its attempt to link a large part of the country’s population with bank accounts, with more than Rs 1 lakh crore in deposits and less than 20 percent of the accounts now dormant.

Indian banks had about 36.24 crore Jan Dhan account holders as of July 17, 2019, the Department of Financial Services said in response to a BloombergQuint Right To Information (RTI) query quoting data sourced from banks. Of this, about 6.5 crore or 17.9 percent of the accounts were inoperative, the reply added.

These accounts held Rs 1.03 lakh crore in deposits, data on the scheme’s website shows.

The scheme was announced by Prime Minister Narendra Modi-led Bhartiya Janta Party government in 2014 as a way to expand the reach of the formal financial system. These accounts were intended as no-frill accounts which provide basic services and do not require the maintenance of a minimum balance.

The scheme, while extended to the entire banking system, has been driven mainly by public sector banks, which have the widest network in rural areas. The scheme also saw lukewarm interest from private banks since the cost of operating these accounts is often not justified by the amount of deposits they draw.

Nearly 97 percent of the Jan Dhan accounts were opened with the state-run banks, according to the RTI response.

Notably, the share of Jan Dhan accounts in private banks witnessed an increase during the financial year 2016-17, the period when Prime Minister Narendra Modi announced demonetisation of old denomination of Rs 500 and Rs 1,000.

Banks With Highest Proportion Of Dormant Jan Dhan Accounts

Among the top five state-run banks by loan book, State Bank of India had the highest number of Jan Dhan accounts.

India’s largest lender had 12.75 crore Jan Dhan accounts as on July 17, DoFS’ RTI response showed. It was followed by Bank of Baroda (4.6 crore) and Bank of India (2.9 crore).

Of these top five PSU banks, Canara Bank had the highest percentage of dormant accounts at 28.45 percent. This was followed by Bank of India (26.52 percent) and Bank of Baroda (19.78 percent).

Punjab National Bank had only about 12 percent dormant accounts, while for State Bank of India, the number was just under 14 percent.

The account holders may have multiple accounts with other banks and that could lead to accounts becoming inoperative, PK Gupta, managing director of State Bank of India told BloombergQuint.

The customers have opened accounts for the all family members to avail the benefits of PMJDY accounts but are operating through only one account due to less income, BR Patel, general manager at Bank of Baroda said. “Migration of labourers from one place to another and opening another PMJDY account at new place, which makes earlier account dormant, could be another possible reason,” Patel added.

Former RBI Deupty Governor R Gandhi also agreed that the proportion of dormant accounts is not alarming.

“There could be three possible reasons for the bank accounts lying inoperative—migration of customers from one place to another which leads them to create another account leaving the older account inoperative, customers already having multiple accounts with other banks but choosing to use one account based on his convenience and/or the customer holding the account is no longer alive and the account remained unclosed,” Gandhi told BloombergQuint over the phone.

SBI and Bank of Baroda said they are creating awareness to get users reactivate their account.

“Several Jan Dhan accounts were added after SBI initiated a campaign in rural areas and will continue to campaign to add more accounts and bring down the number of dormant accounts,” SBI’s Gupta said.

Canara Bank, Bank of India and Punjab National Bank have yet to respond to BloombergQuint’s queries regarding inoperative Jan Dhan accounts.

Across private banks, the proportion of dormant accounts was higher.

ICICI Bank Ltd. had the highest number of Jan Dhan accounts. The Mumbai-based lender had 47 lakh accounts under the scheme. This was followed by HDFC Bank Ltd. (24 lakh) and Axis Bank Ltd. (8.7 lakh).

Of the top five private lenders, Kotak Mahindra Bank Ltd. had the highest percentage of dormant Jan Dhan accounts, followed by Yes Bank Ltd. and ICICI Bank.

Kotak Mahindra Bank and Yes Bank declined to comment on BloombergQuint’s emailed queries regarding inoperative accounts. Axis Bank, HDFC Bank and ICICI Bank are yet to respond to BloombergQuint’s query on email.