Prime Minister Narendra Modi’s Pradhan Mantri Jan Dhan Yojana has received accolades from Washington-based Brookings Institution, a not-for-profit public policy organisation, which has said in its report that the NDA government’s initiative has accelerated efforts to promote financial inclusion. Giving India a respectable 71 percentage points, ahead of its neighbours Pakistan and Bangladesh (China was not included in the Brookings study), the report said that the PMJDY programme has “demonstrated considerable impact with respect to expanding financial access”. It has, however, cautioned that efforts to promote financial capability and enhance the utility of financial products and services need to be emboldened.

The PMJDY, launched in August 2014, aims to foster universal access to banking facilities, including providing basic bank accounts with overdraft facilities and a debit card to all households, promoting financial literacy, advancing the development of a credit guarantee fund to mitigate risks from overdraft facilities, and offering opportunities for micro insurance and pensions. 

The 2016 Brookings Financial and Digital Inclusion Project Report noted that the “PMJDY program has certainly helped drive access to formal financial services across India and amplify the discourse surrounding financial inclusion among public and private sector stakeholders”. It further hailed the NDA government’s efforts to issue provisional payment bank licences to diverse entities, including non-bank institutions such as India Post in 2015. “Although payment banks are not permitted to extend loans, these entities can accept deposits and sell third party products. The payments banks guidelines opened up the market to non-bank providers by permitting entities such as mobile operators, retail chains, and current agent managers to apply for licenses to provide payments and deposit accounts,” the report noted.

Giving India a 100% score on the “country commitment” parametre, the report said the present government in India in April this year made significant advances in terms of strengthening the digital eco-system by launching the unified payments interface (UPI) under the National Payments Corporation of India (NPCI). This is developed as a common platform through which consumers can transfer money from one bank account to any other bank account instantly. Citing a United States Agency for International Development (USAID) study, the report highlighted the limited reach of India’s digital ecosystem. “…the USAID study found that less than 10 percent of merchants accepted digital payments, and only about 10 percent of consumers in India had used a debit card for payments within the previous year”, it said.

The report, authoured by John Villasenor, Darrell M. West and Robin Lewis, all noted public policy experts in the US, evaluated the access to and usage of affordable financial services by “undeserved” or the deprived people across 26 geographically, politically and economically diverse countries. It assessed the countries’ financial inclusion ecosystems based on country commitment, regulatory environment, and adoption of selected traditional and digital financial services. India scored 100% on country commitment, 94% on regulatory environment, but a dismal 44% on the last parameter.

The report recommended that “over the coming months, payments banks must surmount logistical challenges involving the setup of subsidiaries and hiring staff, as well as determining a viable business model, in order to expand access to financial products and services among marginalized communities”. It further said: “Additionally, government and private sector stakeholders must work together to address barriers to financial inclusion among women, 67 migrants, and other underserved populations.”


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