The NDA government has flagged off its first major scheme, the Pradhan Mantri Jan Dhan Yojana. Bank account openings on the first day beat expectations, as approximately 1.5 crore new accounts were opened on day one. The PMJDY will provide a bank account, overdraft facility, and basic insurance coverage to all households. It is a welcome move towards greater efficiency in transferring welfare benefits. By putting its resources and political capital behind this scheme, the government has acknowledged that cash transfers are going to be the way forward.
True financial inclusion will require more than opening bank accounts. Households have diverse financial portfolios, and the poor sometimes engage in a much larger number of financial activities than the rich. A mandate driven, one-size-fits all approach is not the solution to this thorny issue. There is an immediate need for allowing and encouraging entrepreneurial innovation to cater to the varying needs of consumers of financial services.
