Tehelka sting ‘Operation Jan Dhan’: All that glitters is not sold

Empty rhetoric? Nearly 80 percent of the accounts opened via the Jan-Dhan Yojana don’t have any money in them
Empty rhetoric? Nearly 80 percent of the accounts opened via the Jan-Dhan Yojana don’t have any money in them

India will host a US president, Barack Obama, at the Republic Day parade for the first time, making history. A quieter history is also afoot in the world’s largest democracy that will peak on 26 January.

One of the world’s biggest financial inclusion programmes, launched by Prime Minister Narendra Modi to “end financial untouchability”, will wrap up its first phase in a splash of spectacular numbers.

Unlike his predecessors, Modi has never left the front-pages of newspapers or television screens ever since he rode to office on a surge of popular votes in the 2014 General Election. Since then visits abroad, election campaigns across several states and media outreach programmes have made him India’s most visible prime minister.

And he loves to flog his plans and development programmes for the country, his mandate in the election. On 11 January, he explained his rationale at the Vibrant Gujarat summit for those who thought this a tad too vulgar. “Hyping things up helps to create a momentum,” he said. “It forces the government officials to quicken the decision-making process; besides, it helps to do away with red-tapism.”

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That claim will be tested by the Pradhan Mantri Jan-Dhan Yojana (PMJDY). As of now, momentum has been created, officials have made quick decisions and red-tapism seems to have been cut to pile up impressive statistics about the progress of the financial inclusion package announced last August.

A raft of dramatic statistics suggested that the ambitious financial inclusion programme was a scheme that was galloping as fast as the BJP’s poll star and shovelling India’s poor into the more desirable economic segment of the middle classes.

The following are the benefits the government has listed for those opening accounts under the PMJDY:

• No minimum balance required

• Accidental insurance cover of Rs 1 lakh

• Life insurance cover of Rs 30,000

• Easy transfer of money across India

• Beneficiaries of government schemes will get
direct cash benefits in these accounts

• After satisfactory operation of the account for six months, an overdraft facility of Rs 5,000 will be permitted, for one account per household, preferably of the female member

• Access to pension and insurance products

• RuPay debit card (for availing accidental insurance cover, the debit card must be used at least once in 45 days)

The size of the problem

A September 2014 Deloitte and Confederation of Indian Industries report said only 50 percent of the country’s population had bank accounts while less than 20 percent had access to credit from banks. The PMJDY’s objective was to get every household in India a bank account so that the poorest segment of the society is linked to the banking system.

According to the latest Census figures, there are 24 crore households in India. A government survey in November-December 2014 found that 21 crore households could technically benefit from the PMJDY.

graph_resultThe day the scheme was launched, 1.5 crore accounts were opened in India and the latest data says that 11.07 crore accounts were up and running as on 10 January. A whopping Rs 8,698 crore was lying in these accounts, but a majority of them have zero balance (see graphic).

However, reports from ground zero of the PMJDY suggest that the numbers might not add up to much in terms of reducing economic inequity.

Despite the obvious popularity of the scheme, the banks make no bones about its low worth to their bottomline. Several banks actively discourage many poor applicants from opening accounts. Tehelka caught officials of nine such banks, a fine mix of public and private entities, refusing to open accounts under the scheme. Many of the bankers were vocal about how little they gained from the scheme. Many were happy that they had achieved whatever number the top managers had decided was necessary and practically stopped opening new accounts.

The scheme itself has no ceiling fixed on the number of accounts that can be opened.

The rationale offered by most bankers Tehelka interviewed with a spy camera were these:

• They expect most accounts to be dormant. Thus, essentially, PMJDY accounts would only increase work for the staffers without commensurate financial benefit for the banks

• They turn back many of those seeking to open accounts under the scheme for lack of identity cards. This is expressly against the scheme’s stipulation

• A favourite bureaucratic excuse to turn back the poor seeking to open a savings account under the scheme is to say that the forms have been exhausted. There is no assurance of when they will be made available again

• In one case, a bank turned back our reporters saying they belonged to the wrong municipal ward. However, a banker in another bank next door, in the same ward, said there was no such rule

The dramatic upswing in the number of accounts opened in the banks, predictably by leaning on the public-sector banks, is likely to enter The Guinness Book of World Records and The Limca Book of Records, as a government official preened.

However, 80 percent of these accounts have not a single rupee. And there are fears that many accounts may have been opened by those already holding multiple accounts. The low regulatory bar is something that will entice those who want to abuse the system.

result_jandhanReserve Bank of India (RBI) governor Raghuram Rajan gave voice to these apprehensions at a conference of Indian Banks Association in Mumbai on 15 September 2014.

“When we start a scheme, we must ensure that it does not go off track,” he said. “The goal is to draw people in and not just increase the pace or numbers.”

Rajan also feared that the scheme might come a cropper if the same person opens numerous accounts or no transactions are carried out or if the account-holder’s first banking experience is not good.

Retired banker and independent analyst US Bhargava was also sceptical about the spike in account opening under the scheme.

“Concerns have been raised that some people may have opened multiple accounts to take advantage of the scheme and claim overdraft or insurance cover more than once,” he said.

RBI deputy governor SS Mundra also raised fears that multiple accounts opened by the same individual might have swelled the number of accounts under the scheme.

“I cannot tell the exact number but surveys suggest that as many as 30 percent of the accounts may be duplicate,” Mundra told a business television channel in an interview on 20 December.

Adds Bhargava, “The biggest flaw of the scheme is that the banks were entrusted with meeting a target in a short period of time. It increases the chance of misreporting from banks under pressure.”


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  1. While there may be instances of
    the bank managers dissuading the poor and the illiterate in opening accounts, the
    fact that 110 million accounts have been opened in such a short time shows its
    popularity and success. It may be true that many have done it with the hope of
    getting an OD of Rs 5000 which they think may not have to be returned. Since
    the subsidy and other entitlements would be credited to the Jandhan accounts,
    the banks would have an opportunity of recovering the OD in most cases. The
    transfer of funds for LPG subsidy has already started. There are 160 million LGP
    customers in the country and the average consumption was 6.5 cyl per annum.
    That makes a potential one billion transactions annually or 3 million per day.
    One understands from a source that the banking system is already getting one
    million transactions daily to be credited to the account holders, majority of
    whom were Jandhan class. Then there are various other social benefit schemes
    which would be brought under direct transfer. Although the direct transfer was
    planned much earlier by the previous govt beginning with the introduction of
    Aadhar cards and linking the banks accounts with the same, the critics cannot
    deny the fact that the present govt, by opening the Jandhan accounts, has given
    a great impetus to the programme.


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