JAM: Will The Idea Stick?

With the recent demonetisation of currency, Jan Dhan Yojna accounts are back in the limelight, but not for all the right reasons. Many of these accounts, which were essentially opened for the poor, have started registering higher deposits – to the tune of Rs. 21,000 Crore in just two weeks, in case you were wondering. Are the accounts being given on rent to help people park unaccounted money? Well, we’ll find out when the government starts an in-depth scrutiny.

In the meantime, here’s an overview of the Jan Dhan Yojana Scheme and how the linking of Aadhaar and Mobile Numbers will bring India’s poor under the umbrella of mainstream banking.

A major initiative of the Union Budget 2015-16 was ‘JAM’, or ‘Jan Dhan Yojana-Aadhaar-Mobile Numbers’, which is geared towards improving the quality of life of Indians. This is an initiative recommended by the Economic Survey of India. In India, macro-economic initiatives usually lose their punch by the time they reach the common person, owing to leakage of benefits and inefficient implementation. As per the economic survey, the JAM initiative is expected to touch the common person without being diluted by these inefficiencies.

So far, the initiative has been a stellar success. It has found space in the Guinness book of World Records. The record being – the opening of the highest number of bank accounts in a week.

Additional Reading: All about the PMJDY life cover!

What is JAM?

The Pradhan Mantri Jan Dhan Yojana, initiated in 2014, is a comprehensive banking scheme to ensure bank accounts and several related benefits (such as Life and Accident Insurance,and pension) for all Indian households. By connecting this with the Aadhaar and the mobile numbers of individuals, the Government aims at “Wiping Every Tear from Every Eye” by ensuring that all the benefits are passed directly to the common person’s bank account and through other authenticated sources, thus eliminating the need for intermediaries.

People both from urban and rural areas can open a zero balance account as part of the yojna, which comes with a RuPay Debit Card. In addition to these privileges, all accounts are managed under the Core Banking System (CBS) and support mobile banking features using Unstructured Supplementary Service Data (USSD). The importance of USSD is that this technology works even on feature phones, thus allowing people from all sections of society to experience banking through and through.

Encouraging people to keep accounts like these active is one of the problems that has been faced by similar initiatives in the past. In order to inculcate in people the habit of using a bank account (especially those from the rural areas), the plan offers a Rs. 5,000 overdraft facility to all those who keep their accounts operational for 6 months.  This feature has definitely worked its charm. Do note, this facility is available only to those individuals who have their Aadhaar number linked to their bank account. Linking Aadhaar to the account also gets the account holders Accident Insurance worth Rs. 1 Lakh. Hard to say no to a scheme like this, right?

Additional Reading: The Aadhaar Card – A Step In The Right Direction

What the common person can expect?

India, even with all its enviable economic growth and high GDP numbers, still has a large section of its population living below the poverty line. The JAM initiative by the Modi government is expected to have them licking their chops, given the benefits offered.

Direct Benefit Transfer: JAM will ensure that benefits being transferred reach the common person without any leakage. It will be done in a transparent and cashless manner, in the form of direct transfer of funds to their bank accounts. At present, there are only one crore beneficiaries in India who have a direct transfer facility. With the introduction of JAM, the number of residents having this facility will cross the ten-crore mark. From LPG subsidies and pension funds to money for scholarship schemes, all benefits will be directly transferred to the bank accounts of the poor. With the introduction of the JAM module, the Government will be able to track whether the benefit has reached the desired household and thereby can make sure that the goods and services reach the intended beneficiary.

If you are one of those who worries about the future, then Pradhan Mantri Jan Dhan Yojana has a lot more gems in store. The RuPay platform is being linked with Kisan Credit Card (KCC) and Pension Schemes like Swavalamban. There is also a plan to extend loans to people via the framework.

JAM to Plug in Leakages: Have you seen how the poor line up with cans at a Government fair price shop for kerosene, only to be told after hours that it is out of stock? India offers a number of subsidies to the poor. The subsidies extent to products like rice, LPG, diesel, fertiliser, kerosene, etc. The poor man at the bottom of the pyramid, however, does not always get the benefit of such subsidies. People living below the poverty line or the lower middle class, who need such subsidies more than anyone else, often find themselves elbowed out of such schemes. With the use of JAM, the Government can send the subsidy for such products directly to the beneficiaries’ accounts, allowing them to get access to the goods and services available at various public distribution systems.

JAM and Indian Postal Network: The Indian postal network is a mammoth entity with over 1,55,015 post offices spread across the country. With the Finance Ministry allowing the postal department to double up as small payment banks, the poor people living in rural areas can now use post offices to transact on their Aadhaar and mobile-linked accounts and thereby have access to banking services. This will make sure that the money transfer facility is made available to people living in the hinterland with no access to a bank nearby. India has over 600 million unique users of mobile phones. People living in hard-to-reach rural areas also have access to mobile phones due to the growing penetration of technology. Leveraging this to transfer benefits directly to the common person is only going to help integrate the economically disadvantaged into the mainstream.

Now the real question is whether the creation of JAM will indeed benefit the poor and the needy or will it end up being Just Another Measure (JAM)? We’re still waiting to find out.

Now, for those of you who are keen to open a bank account, we are always here to help.