Financial inclusion is an essential part of economic growth and development of rural areas. Benefit of development in most of the developing countries is shared by a society which tends to be a small percentage of the total population. Through financial inclusion, it is possible to transform economically deprived people into a large section of the society that actively contributes to the economic development of their country over a period of time.
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Pradhanmantri Jan Dhan Yojna (PMJDY):
Pradhanmantri Jan Dhan Yojna (PMJDY):Aims, objectives and features of PMJDY:
1. It was an ambitious attempt at extending formal financial services in a country.
2. PMJDY is built on simplistic norms with blanket utilization. Its appeal is uncomplicated access to financial service (like banking, savings and deposit accounts, remittance, credit, insurance, pension) for anyone rural or urban, who wishes to access them.
3. The absence of categorization smoothens the implementation of the program.
4. Some distinctive provisions include ‘no minimum requirement for bank accounts’, ‘an accident insurance cover of Rs. 1 lakh’, ‘banking service on non-smartphone users’, grievance-redressal mechanisms and active state/district level monitoring.
Benefits Of PMJDY:
1. According to recently released World Bank global index data, 80% of Indian adults now have bank accounts.
2. Most of the people from rural areas gained access to formal financial structures through PMJDY.
Hurdles In The Way To Achieve Goals:
1. Increase in proportion of adults having bank accounts is indeed impressive (80 % in 2017 from 53 % in 2014), but 48 % of those who have an account in financial institutions made no withdrawal or deposit in the past one year.
2. PMJDY has managed to get many people to open bank accounts, but there is no commensurate increase of these accounts, availability of formal credit, or savings in financial institutions, especially among the country’s poorer and marginalized sectors.
Analysis of PMDJY’s success:
1. Credit deposit ratio, which tells us how much credit can be availed Per Rs. 100 of bank deposits by a particular population group.
RBI categorizes this in rural, semi-urban, urban and metropolitan areas. It mainly happens in the rural and semi-urban areas where the poor and marginalized beneficiaries are expected to be present in larger numbers.
Credit Ratio for the rural population increased from 41 % to 66.9% in 2016.
However, much of the rise took place before the PMJDY was launched, particularly during the tenure of UPA-1 government, when the credit ratio increased from 43.6% in 2004 to 57.1 % in 2009.
Therefore, there is no sign, at least on this account, of increased access to form credit that the PMJDY is supposed to have ensured for its beneficiaries.
2. Credit size – To see the accurate picture we need to look at the data by credit size.
The RBI provides figures for credit at disaggregated level in terms of small versus large borrowers.
Small borrower – Those with outstanding under Rs. 2 lakh.
The share of small borrowers in total credit has also been falling during the Modi government. In fact, it has been falling since 2002, while the decline in 2004-14 period can be explained by the dramatic rise in corporate credit or large borrowers, there is no reversal in this trend even after the growth of credit fall in general in more recent times as a result of rising non-performing assets (NPA) and the debt overhand of public sector banks.
Even in 2016, in the best performing year under Mr. Modi, it merely matches the lowest rates of growth witnessed during the economic crisis period of 2009-10.
3. To further probe access to credit for small borrowers, let’s have a look at these loans in two categories: agricultural credits and personal loans.
The data shows that while the share of small agricultural credit has stagnated during this regime, that of the small personal loans has decreased slightly.
Problems marginalised section face due to Non-inclusion of their finance in formal credit:
Poor households in the absence of access to formal credit, have to deal with the moneylenders who charge exorbitant rates of interests.
Conclusion of Analysis of PMJDY: Based on these trends, it can be argued that there seems to be no increased access to credit for the poor whether it is as a result of PMJDY or otherwise.
To conclude, the available evidence presented so far does not suggest that the precarious conditions of indebtedness that the poor people of this country find themselves in was seen as a result of PMJDY.
Micro Units Development & Refinance Agency (MUDRA loans):
The growth of entrepreneurship in the non-corporate small business sector (NCSB) in smaller states has not received any major boost under the central government’s ambitious MUDRA loan scheme.
Data shows that the states having high credit deposit ratio (a yardstick that determines better institutional credit) are the ones reaping the benefit of the scheme.
Objectives of MUDRA:
1. Objective of MUDRA was for development and refinancing of micro enterprises, focusing on funding to the non-corporate small business sector through various last mile institutions.
2. It is aimed at using micro finance as an economic development tool that helps to provide income generating opportunities to the people at the bottom of the pyramid, targeting small manufacturing units, shopkeepers, fruits and vegetables vendors, truck and taxi operators, food-service units, repair shops, machine operators, artisans and food processors.
Hurdles In MUDRA
1. Too many practices in loan origination have been neglected while authorising and disbursing loans.
2. Even if loans are sought by business owners genuinely seeking growth, bankers disburse them with an eye on economic development, ensuring repayment is still a challenge.
The problem in the loans is that:
First problem: Collateral that could protect the interest of the bank is not required in this scheme, unless the asset that is purchased is itself is served as a collateral.
Second problem: Susceptibility of business of such borrowers.
Size of loans that have been allotted: Three stages, starting from loans up to Rs. 50,000 to ten lakh.
Breath of Fresh air in this scheme:
Rupees two lakh fifty three thousand crores have been sanctioned for about 4.81 crore PMMY loans under all three heads in the financial year 2017-18. Average loan sanctioned stood at Rs. 52,706 /- for the year.
NPA’s (Non performing Asset) arising of this scheme is about 5.2 % for India’s largest bank (State Bank which has sanctioned Rs. 28,556 crores), a figure of percentage of NPA that the bank views as being under ‘Acceptable Limits’.
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