Context:

• The Pradhan Mantri Jan-Dhan Yojana (PMJDY), one of the flagship schemes of the present government, was launched in August 2014. 
• The ‘J’ in JDY is the ‘J’ in ‘JAM’ (Jan Dhan-Aadhaar-Mobile) through which the Economic Survey of 2015 claimed that “every tear from every eye” could be wiped. 

World Bank Global Findex:

• The recently released World Bank Global Findex data show that 80% of Indian adults now have a bank account, which is being celebrated as the success of the JDY. 

Value Edition:

• Financial inclusion is not just about opening bank accounts, but also about using these accounts and providing access to formal credit. 

Remaining Issues:

• While the increase in the proportion of adults having bank accounts is indeed impressive (80% in 2017 from 53% in 2014), 48% of those who have an account in a financial institution made no withdrawal or deposit in the past one year.
• In fact, the major limitation of the JDY has been that while it has managed to get many people to open bank accounts there is no commensurate increase in the use of these accounts, availability of formal credit, or savings in financial institutions, especially among the country’s marginalised and poorer sections.
• There is no sign, at least on this count, of increased access to formal credit that the PMJDY is supposed to have ensured for its beneficiaries.
• The share of small borrowers in total credit has also been falling. In fact, it has been falling since 2002. While the decline in the share during the 2004-14 period can be explained by the dramatic rise in corporate credit of large borrowers, there is no reversal in this trend even after the rate of growth of credit fell in general in more recent times as a result of rising non-performing assets and the debt overhang of public sector banks. 
• The share of small agricultural credit has stagnated during this regime, that of the small personal loans, which covers home, vehicle, durable goods and so on, has fallen.

Issue of money lenders

• Poor households in India, in the absence of access to formal credit, have to deal with moneylenders who charge exorbitant rates of interest. This is one of their biggest worries.
• A recent source that is available in this regard is the Household Survey on India’s Citizen Environment and Consumer Economy, 2016, which shows that while for the top 1% of the population, one in six are exposed to informal credit, within the poorest section of the population, the figure is four times as high, with two in three taking credit from informal sources.
• Access to bank accounts seems to have had little effect on their dependence on private money lenders.
• A study of RBI in 2017 states that,  nearly half of the households that take loans from moneylenders are not able to repay them in time, which is a typical condition for a debt trap.

Source:TH