Money in the bank. (Photographer: Dhiraj Singh/Bloomberg)

Deposits In Jan Dhan Accounts Inch Close To Rs 1 Lakh Crore

Deposits in ‘Jan Dhan’ accounts, intended as a first step in reducing financial exclusion across India’s population, have inched close to the Rs 1 lakh crore mark, shows data available on the website of the Pradhan Mantri Jan Dhan Yojana.

Jan Dhan accounts — a version of no-frill accounts and the basic savings accounts — were launched in August 2014 and saw a big jump in deposits following demonetisation. While it was feared that these funds would flow out, increased use of direct benefit transfers for subsidy payments have helped keep deposits high.

As on May 3, 2019, deposits in Jan Dhan accounts stood at Rs. 98,874.5 crore, spread across 35.54 crore beneficiaries. Deposits in such accounts have risen by 22 percent over the previous year, marginally lower than the 25 percent growth seen in the previous years.

Average account balance in the Jan-dhan accounts stood at Rs. 2,782 in April, 2019 compared to Rs. 838.8 at the end of the scheme’s first phase in January 2015.

Data on the percentage of accounts that remain dormant is not provided on the website. Estimates have varied.

The World Bank in its Global Findex report 2017 had estimated that 48 percent of accounts are dormant. Finance Minister Arun Jaitley in a response to parliament in December 2018 had suggested that about 23 percent of accounts are inactive.

State Bank of India, which has the largest number of such accounts, estimates that the proportion of inoperative accounts has fallen below that, at least across its network.

PK Gupta, managing director at State Bank of India told BloombergQuint that usage has risen due to direct benefit transfers, which help in ensuring that these accounts are used.

Over time, usage has risen and just a tenth of accounts under Jan-Dhan remain zero balance from as much as 90 percent earlier.
P.K. Gupta, Managing Director, State Bank of India

V.G. Kannan, chief executive of the Indian Banks Association also attributed the increase in usage to the Direct Benefit Transfers from public welfare schemes.

Deposits In Jan Dhan Accounts Inch Close To Rs 1 Lakh Crore

Private Banks Conspicuous By Their Absence

As expected, a large proportion of the Jan Dhan balances are in accounts with public sector banks. These banks had opened a bulk of the accounts due to their extensive rural network and close monitoring by the government.

Private banks in contrast went slow as the cost of servicing these accounts was perceived to be higher than the benefits that accrue from small depositors.

The share of private banks has fallen to 2.9 percent as of April 2019 compared to 6.9 percent at the same time last year. Public banks now hold 79.4 percent of all deposits under Jan-Dhan, 1.5 percentage points higher than at the end of the first phase. The rest of the share is held by regional rural banks.

Targets set for public banks were always significantly higher than those for private banks, said Kannan. However, public banks have also made considerable efforts in reaching small rural pockets in the country, he said while adding that banks that were active in opening such accounts are benefiting as deposits rise.

Uttar Pradesh Sees Highest Deposits

Data of deposits across states shows that Uttar Pradesh has the highest deposits and the highest number of beneficiaries, followed by West Bengal.

Crisil Inclusix, an index that measures financial inclusion across India, has indicated an improvement in financial inclusion in Uttar Pradesh, led by the Jan Dhan Yojana.

Deposits In Jan Dhan Accounts Inch Close To Rs 1 Lakh Crore