In terms of scope and size, and the breadth of coverage, the Pradhan Mantri Jan Dhan Yojana is a stand-out scheme perhaps among all financial inclusion initiatives underway in other parts of the world.
With 24.1 crore bank accounts having been opened till August 31, 2016, and with an accumulated balance of Rs 42,094.24 crore, according to official records, it could be the transformative agent that the Prime Minister has so soften talked about. By bringing all households into banking, it will provide access to other financial services such as insurance and pension besides credit, help reduce leakages in subsidy payments, promote the larger goal of encouraging electronic payments and progressively reduce the use of cash.
More than 50 per cent of the Jan Dhan accounts have been seeded with the Aadhaar of the account holder and thus, these accounts are eligible for all wage payments to NREGA workers through Direct Benefit Transfer and also for direct subsidy payments related to LPG.
An estimated 19 crore of these accounts have been issued Rupay cards and they can be used like any other debit card to withdraw money from ATMs.
All the more reason why efforts to ramp up numbers of non-zero balance accounts raises several concerns about ethics, breach of trust, accuracy of data and, more worryingly, the potential for misuse.
Banks in India have a code of customer rights — developed by Banking Codes and Standards Board of India — to ensure protection of customers, promote fair banking practices, and foster confidence in the banking system. Officials themselves putting money — even if it’s merely a rupee — into Jan Dhan accounts without the customer’s knowledge to boost numbers of non-zero-balance accounts violates the code. To establish this as a mala fide may be difficult given that banks have said that there aren’t any written instructions.
Justice B N Srikrishna, former Supreme Court judge who headed the Financial Sector Legislative Reforms Commission or FSLRC, which submitted a host of recommendations for a new financial architecture, isn’t certain about the legal bar on transferring or depositing funds into a bank account without the express approval of the account holder.
But what is of greater concern, he says, is the potential for misuse of such accounts. “Someone could deposit money into your account and later anyone can say this was bribe funds. Using the account of someone who is not aware of basic banking is a good way to convert black money,” he says.
For the more savvy or financially literate customer, this may not be an issue given constant alerts for each transaction. But that’s not the case for those with recent access to basic banking services.
Former Expenditure Secretary D Swarup says that a cost-benefit analysis should be done to ensure that these schemes are successful and effective. In other words, if a one-rupee payment needs to be made to reduce zero-balance accounts for whatever reason, says Swarup, a budgetary provision for implementing this and compensating banks for providing such services would be a much more transparent way of doing it.
Also, this would not put pressure on banks and ensure accountability.
Breach of trust isn’t the only issue.
Inflated numbers also portray an inaccurate picture of the success of a scheme and this can lead to faulty policy interventions, more funds being poured in without any effective monitoring or assessment post implementation. This could also prevent corrective measures mid-course and a more robust rollout of social sector programmes.