Financial Inclusion – PMJDY, Digital Payments
🟠 Topic 44: Financial Inclusion – PMJDY, Digital Payments
📌 Introduction
Financial Inclusion refers to ensuring that all sections of society, especially the underprivileged and marginalised, have access to affordable financial services, including bank accounts, credit, insurance, and digital payment systems. It is a critical pillar for inclusive development, reducing poverty, enhancing resilience, and fostering entrepreneurship.
India has made tremendous strides in financial inclusion through Pradhan Mantri Jan Dhan Yojana (PMJDY) and digital payment innovations like UPI.
🔹 What is Financial Inclusion?
📖 Definition
The process of ensuring access to financial products and services needed by individuals and businesses, at affordable costs, in a fair and transparent manner.
Key Components
| Component | Examples |
|---|---|
| Banking Services | Savings accounts, debit cards |
| Credit Access | Kisan Credit Cards, Mudra Loans |
| Insurance & Pension | PMJJBY, PMSBY, Atal Pension Yojana |
| Digital Payments | UPI, AEPS, IMPS |
🔹 Evolution of Financial Inclusion in India
| Phase | Key Milestones |
|---|---|
| Pre-2000 | Priority sector lending, bank nationalization |
| 2005 | Financial Inclusion Plan (FIP) introduced |
| 2014 | Launch of PMJDY, game-changer for inclusion |
| 2016 onwards | Digital Payments Revolution, UPI boom |
🔹 Pradhan Mantri Jan Dhan Yojana (PMJDY)
📖 Overview
Launched in August 2014, PMJDY aimed at ensuring every household had access to a bank account, paving the way for direct benefit transfers (DBT), credit access, and financial literacy.
Key Features
| Feature | Description |
|---|---|
| Zero Balance Accounts | No minimum balance required |
| RuPay Debit Card | Provided to account holders |
| Accidental Insurance | ₹2 lakh coverage |
| Overdraft Facility | Up to ₹10,000 after 6 months |
| DBT Integration | Direct transfer of subsidies (LPG, pensions, MGNREGA) |
Achievements (2023)
| Indicator | Value |
|---|---|
| Accounts Opened | ~51 crore |
| Deposits Mobilised | ₹2.15 lakh crore |
| Rural Accounts Share | ~67% |
| Women Account Holders | ~55% |
Impact of PMJDY
✔️ Financial Access – Formal banking reach to every village.
✔️ Empowerment of Women – Higher account ownership.
✔️ Boost to Savings – ₹2+ lakh crore deposits.
✔️ Direct Benefit Transfers – Leakages reduced via Aadhaar-linked payments.
✔️ Foundation for Digital Payments – Accounts linked to UPI, AEPS.
🔹 Digital Payments – India’s Global Leadership
📖 Digital Payments Ecosystem
| Mode | Examples |
|---|---|
| Unified Payments Interface (UPI) | Instant fund transfers |
| Aadhaar Enabled Payment System (AEPS) | Banking via Aadhaar-linked accounts |
| IMPS | Real-time interbank payments |
| RuPay Cards | Domestic card network |
| BBPS (Bharat BillPay) | Bill payment platform |
UPI – The Gamechanger
- Launched in 2016 by NPCI.
- Enables seamless peer-to-peer and merchant payments via smartphones.
- Supports QR code payments, recurring mandates, and UPI Lite for small transactions.
UPI Key Stats (2023)
| Parameter | Value |
|---|---|
| Monthly Transactions | ~10 billion |
| Annual Value | ₹139 lakh crore |
| Global Adoption | Being implemented in UAE, Singapore, France |
Role of Aadhaar in Financial Inclusion
✔️ Aadhaar Seeding – Links bank accounts with Aadhaar for DBT.
✔️ Aadhaar Enabled Payment System (AEPS) – Banking services at Business Correspondents (BCs).
✔️ E-KYC – Simplifies account opening and credit disbursal.
🔹 Role of Financial Literacy
- Financial inclusion isn’t complete without financial literacy, which ensures: ✔️ Informed decision-making on savings, loans, insurance. ✔️ Awareness about fraud prevention. ✔️ Responsible borrowing and investment.
- RBI, SEBI, IRDAI, and PFRDA run financial literacy campaigns.
🔹 Key Challenges in Financial Inclusion
1️⃣ Dormant Accounts
- Many Jan Dhan accounts remain inactive or show zero transactions.
2️⃣ Digital Divide
- Rural areas face low digital literacy, patchy internet connectivity, and affordability issues for smartphones.
3️⃣ Low Credit Access
- Formal credit reach to micro-enterprises, tenant farmers, and informal workers remains low.
- High dependence on moneylenders continues.
4️⃣ Cybersecurity Risks
- Rise in digital frauds, phishing, and unauthorized transactions in digital payments.
5️⃣ Gender Gap
- Although women own more accounts under PMJDY, their financial decision-making role remains limited.
🔹 Financial Inclusion & Social Security
| Scheme | Focus Area |
|---|---|
| PMJJBY (Pradhan Mantri Jeevan Jyoti Bima Yojana) | Life insurance (₹2 lakh cover) |
| PMSBY (Pradhan Mantri Suraksha Bima Yojana) | Accidental insurance (₹2 lakh cover) |
| Atal Pension Yojana | Pension for unorganised workers |
| PM Vaya Vandana Yojana | Pension scheme for senior citizens |
🔹 Case Study – Digital Payments in Rural India (UP)
- Business Correspondents (BCs) equipped with AEPS devices brought banking to remote villages.
- UPI QR codes enabled small merchants to accept digital payments.
- Women SHGs trained under DAY-NRLM promoted savings habits and micro-credit through digitally-enabled community savings groups.
✅ Outcome: Significant reduction in cash dependency and improved credit access.
📊 Financial Inclusion Dashboard (2023)
| Indicator | Value |
|---|---|
| Banking Access (Households) | 98% |
| PMJDY Accounts (Women) | 55% |
| Digital Payment Share (Retail Transactions) | ~60% |
| Aadhaar Seeding (Bank Accounts) | ~90% |
📚 Practice MCQ
1️⃣ Consider the following statements regarding PMJDY:
- It offers a zero balance savings account.
- It provides an overdraft facility after 6 months.
- It mandates account holders to have Aadhaar.
Which of the above statements are correct?
✅ Options:
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2, and 3
2️⃣ Which platform manages the Unified Payments Interface (UPI)?
✅ Options:
(a) SEBI
(b) NPCI
(c) RBI
(d) IRDAI
3️⃣ What is AEPS?
✅ Options:
(a) A direct benefit transfer scheme
(b) Aadhaar-linked payment system for banking at BC points
(c) Microinsurance product
(d) Digital literacy campaign
