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> Posted by Jayshree Venkatesan, Financial Inclusion Consultant

The Pradhan Mantri Jan Dhan Yojana (PMJDY) Indian national financial inclusion strategy was launched with much fanfare exactly a year ago by the government. As we pass the first year anniversary, there have been a number of reports that indicate that the program is not as successful as claimed, either in reaching the poorest of the poor, or in preventing dormancy of accounts. The World Bank’s latest Global Findex study says the number of people accessing a formal bank account in India increased from 35 percent in 2013 to 53 percent in 2014. The same study also indicates that India is among the countries with the highest percentage of dormant accounts at 43 percent, meaning the PMJDY accounts that have been opened have a high likelihood of becoming dormant.

The idea of opening bank accounts to financially include the poor is by no means a novel idea, and has been tried in various forms over the past decade in the Indian context. While there have been challenges with access, I argue the bigger issue is account dormancy. In India, it’s often the case that after access is extended, accounts remain dormant, which results in high costs for banks. This in turn tends to add to the perception that the poor are unbankable and supports a vicious cycle with bad behavior by bankers to dissuade poor customers.

My research across 368 households in four districts in Tamil Nadu, a state that has fairly high literacy rates, social security programs, and access to bank branches, indicates that awareness about the PMJDY remains low at 16 percent of the households surveyed. If this is the scenario in a state like Tamil Nadu, it is safe to say that the situation is far worse in states that have lower bank branch penetration and social indices.

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