MICROCAPITAL BRIEF: Indian Banks Deceptively Reduce Number of Zero-Balance Accounts Under Pradhan Mantri Jan Dhan Yojana Financial Inclusion Effort

Although the proportion of zero-balance bank accounts opened under India’s Pradhan Mantri Jan Dhan Yojana (PMJDY) program was reduced from 76 percent in January 2015 to 24 percent as of September 2016, it recently has been reported that this is not due to customer deposits. Instead, the staff of 18 public-sector banks deposited amounts as low as INR 1 (USD 0.015) from their personal or the banks’ funds to decrease the number of accounts showing zero balance.

The banks were found to have 105 million bank accounts with balances of INR 1. 12 banks that opened the highest number of PMJDY accounts were found to have balances of INR 10 (USD 0.15) or less in 36 percent of accounts [2]. Bank employees were quoted as saying that the action was taken to confront pressure from senior authorities to reduce the number of zero balance accounts.

PMJDY was introduced by the government of India to provide banking services to the financially excluded. As of September 2016, 150 million bank accounts had been opened under this scheme [1].

About Pradhan Mantri Jan Dhan Yojana

Pradhan Mantri Jan Dhan Yojana is a national financial inclusion campaign that was launched in India August 2014. Among its goals is to open at least one basic banking account for every household. It also promotes financial literacy and access to credit, insurance and pension facilities. As of September 2016, 150 million bank accounts had been opened under this scheme.

By Sharanya Madhavan, Research Associate

Source and Additional Resources:

[1] The Indian Express: The One-Rupee Trick: How banks cut their zero-balance Jan Dhan accounts

[2] Scroll: Not just the one-rupee trick: How banks are hiding Jan Dhan’s zero-balance accounts

Do you know that MicroCapital publishes the MicroCapital Monitor newspaper each month? Find out more at https://www.microcapital.org/products-page/