MBA617A

SOCIAL, POLITICAL AND LEGAL ENVIRONMENT OF BUSINESS

LAST MILE IMPLEMENTATION OF PRADHAN MANTRI JAN DHAN YOJNA

Submitted to:
Dr. Rahul Varman

By Team:
Aman Gupta- 11067
Chirag Jain-11226
Parth Arora- 11489

Contents
Introduction ................................................................................................................................... 3
Focus of our study ......................................................................................................................... 8
Methodology used for collecting data and difficulties faced ..................................................... 9
Field Visit to Lodhar ................................................................................................................... 10
Findings from Bank Visit ........................................................................................................... 12
Analyzing the behavior of corporations .................................................................................... 18
The role of the state..................................................................................................................... 19
Relating it to the course: The Friedmanian perspective ....................................................... 20
Learnings from the project ........................................................................................................ 22
References .................................................................................................................................... 23

IntroductionIn India, the banking industry has grown both horizontally and vertically but the branch
penetration in rural areas has been slow. Even after decades of bank nationalization, with a
shift in focus from class banking to mass banking, we still find exploitative moneylenders in
rural areas and urban slums continuing to exploit the poor.
Pradhan Mantri Jan Dhan Yojana was launched on 28th August, 2014 as a National Mission
for Financial Inclusion with an objective of covering all households in the country with
formal banking facilities, so as to extend the scope of activities of the organized financial
system to include within its ambit people with low incomes and bring them to the mainstream
of growth and make them partners in inclusive growth.

Financial Inclusion: BackgroundThe efforts to include the financially excluded segments of the society into the formal
financial system in India have been in vogue for quite sometime. The Reserve Bank of India
first mooted the concept in 2005 and branchless banking through Bank Mitr (Business
Correspondent) was started in the year 2006. In the year 2011, the Government of India gave
a serious push to the programme by undertaking the Swabhimaan campaign to cover over
74,000 villages with population of more than 2,000 (as per 2001 census), with banking
facilities.
However, the desired benefits were not visible, and therefore, the present proposal is an
integrated approach to bring about comprehensive financial inclusion.

Financial Inclusion in India: Current StatusAn independent study [1] brings out some disturbing numbers on the current status of financial
inclusion in India

As per census 2011, only 59% of Indian households have bank accounts.
Around 50% of bank accounts are not operated at all.
Out of around total 6 lakh villages, only 46,000 have bank branches.
Around 3.3 lakh villages have Business Correspondent Agents (BCA), but this model
has largely failed.
Average rate of interest charged by the local moneylenders in 34%.
55% of rural dalit families have to borrow money from local moneylenders, shroffs,
etc.
Average loan-interest rate charged by private microfinance institution (MFIs) is 24%,
but recently microfinance agents have been resorting to malpractices to recover loan
money and this model has begun to fail.

Pradhan Mantri Jan Dhan Yojana: Salient Features-

The Six Pillars of PMJDY-

Phase 1: (2014-2015) Three Pillars

1.

Sub-Service Area

2.

Bank Account

3.

Country will be divided into sub-service areas (SSAs).

Each SSA will cover 1000-1500 households.
Each household will have a banking outlet within 5 km distance.

Each household will have atleast one bank account.

Even minors of 10 years and above age, can open.
It comes with a RuPay debit card.
Rs. 1 lakh accidental insurance cover.
If your good credit history for first 6 months, then there is Rs.5000 overdraft facility.

Financial Literacy
To make people aware of benefits of saving and investing money properly.

Phase 2: (2015-2018) Next Three Pillars4.

Credit Guarantee Fund

To cover losses in overdrafts.

5.

Micro-Insurance
To provide micro-insurance to all willing and eligible persons.

6.

Unorganized Sector Pension Schemes

Earlier Government launched Swavalamban Yojana to make unorganized sector
workers join NPS scheme.
Those people will get NPS-pension directly in these Jan-Dhan accounts.

Impact of financial inclusion on households-

Major Stakeholders1.

Department of Financial Services

Overall ownership of the project on financial inclusion.

Overall monitoring and implementation
2. Reserve Bank of India
Direction to the banks
3. Banks
4.

Indian Bank Association (IBA)

Coordination in financial inclusion effort with all banks.

5. National Payment Corporation of India (NPCI)

Coordination and necessary guidance and supports to banks for in providing and
proper operations of RuPay cards.
To facilitate interoperability among Bank Mitr (Business Correspondent)
Necessary support to banks in making available USSD based mobile banking with
low end mobile phones so that customer can avail basic banking services
6. Unique Identification Authority of India (UIDAI)
Convergence of Aadhar enrolment with bank account opening.
Mapping multiple accounts with a single Aadhar number.

Focus of our studyJan Dhan Yojana features in Guinness Book of World Records.
As many as 11.5 crore bank accounts opened, exceeding the enhanced target of 10 crore
and covering 99.74 percent of households
The aforementioned headlines have off late been dominating the newspapers- the ministers of
the current government falling over each other to pat themselves on their back for the roaring
success of this scheme. The very fact that even the prime minister, time and again has used
the success of this newly envisioned scheme as a signal of the success of his newly formed
government makes us sit up and notice.
We, a small group of three researchers set out to investigate the veracity of government
claims for this scheme with primary last mile data to assess the schemes success. The study
will comment on the realities of last mile implementation first, talking about end user
experiences and then moving on to assess the role of institutions involved in the last mile
implementation viz. banking institutions, business correspondents, National Payment
Corporation of India (RuPay card issuing authority which also pays premium facilitating
accidental insurance of 1 lakh for account holders) and insurance institutions like HDFC
ERGO, New India Assurance etc.
Why is this study important in the context of the course?
The study of the JDY scheme is important in this course because the scheme seamlessly ties
up the three important aspects of the course, namely the society (end user or beneficiary), the
political forces (the government) and corporations (banks, payment corporations, insurance
companies etc). To explain, the study is important because it analyzes how, in a strongly antisubsidy and a pro-free market central political context, does a scheme like Jan Dhan Yojana,
which is designed for the poor and unbanked holds up, and what is the role that the
facilitating institutions, primarily business corporations have to play in this.

Methodology used for collecting data and difficulties facedTo get an insight into the ground realities of this scheme and collect primary data, we carried
out a field visit to Lodhar Village, which is 5 kms from Nankari. This field visit was
facilitated by Mr. Sorab who owns the barber shop in Hall 1, who lives in Nankari and is
conversant with the locals of Lodhar. Parth, one of our teammates happened to initiate a
conversation with Mr. Sorab earlier in this semester and had discussed with him the study.
Mr. Sorab, almost 55 years old, then had been very kind enough to give his own support and
even volunteer to take the team to Lodhar.
Besides this, a visit to Baroda Grameen Bank in front of ALIMCO happened immediately
post the visit of Lodhar. There we had extensive conversations with the banking officials on
the nature of this scheme and the loopholes within it. We found the officials surprisingly
candid, after a rather unhelpful experience at the SBI, IIT Kanpur branch wherein our
conversation with the branch manager was very formal and tight lipped where he hush
hushed discussion on the nuances of the scheme.
Besides this, a meeting with Mr. Manoj Tewari, a senior official with the State Bank of
Patiala, which Prof. Varman was very kind to facilitate helped greatly in the analysis of the
role of the financial institutions in this scheme.
The aforementioned first person interviews are our sources of primary data. In addition this
report borrows its secondary data from multiple sources which have been correctly referenced
at the end of this report. Sources of secondary data also includes a Tehelka Sting on 10
private banks in the NCR region in relation to the JDY scheme which has been particularly
helpful in highlighting the basic roadblocks in the way of achieving the utopia that financial
inclusion appears as of now.

Field Visit to Lodhar:

Let us first give a little brief on the demography of the residents of the village. Lodhar is a
small village on the basis of population with only 300 residents, almost equally distributed
between males and females with the majority of the residents being muslims. The primary
occupation of the residents is contractual labour with most people engaged in day wage
construction labour at IIT or in other places in Kanpur.
A summary of our first person interactions with the residents of the village is mentioned
below1. Meeting with Sarvesh Kumar (34 yrs), daily wage worker in IIT Kanpur; Raju (41
yrs), construction labourer in the nearby village; Iqbal (67yrs)These people came to know about the scheme through newspaper and business
correspondents. Raju and Iqbal opened their account through a local business correspondent,
while Sarvesh already had an account. Interaction with them revealed that they were not
aware about the scheme in totality. All they were aware of the overdraft facility of Rs 5000
which they were considering as a subsidy.
Iqbal opened his account in mid-october through their local business correspondent, but he
has not yet received his passbook and RuPay debit card. Infact, none of them had no idea
regarding the provision of RuPay debit card.
2. Meeting with Maksood, 55 year old widowShe already had an account in Baroda Grameen Bank, and was entitled to receive widow
pension of Rs 1800 on a monthly basis, but she had received only Rs 1500 in the last two
months. Infact, she tried to enquire regarding this, and there was complete ignorance from the
bank official in addressing her issues.
3. Meeting with Suresh Babu (61) and his daughter Jyoti (25)They had duly completed the form for opening bank account under PMJDY, but the bank was
not accepting their form without giving any reason. Infact Jyoti visited the bank 4-5 times to
enquire, and every time the reply she got from the bank officials was Yeh form galat bhari
ho tum, sahi se bharke lao, without giving any proper justification. Infact she showed the
filled forms, and we didnt find any mistake.
4. Meeting with a Muslim coupleThough they have opened their account under the scheme, but did not receive RuPay debit
card. They too were not aware about the facilities with this account at all. Another lady who
was present there informed that she went to the bank for opening account post announcement
of the scheme, but she was completely ignored by the bank officials.

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These conversations were evident enough to figure out the issues concerned with the target
beneficiaries under the PMJDY:

Lack of an efficient information dissemination mechanism

o There is no formal apparatus to communicate information about the scheme.
Communication about finer points missing even more.
o Village Pradhan has not played his role in dissemination of information at all.
o Confusion about the overdraft facility- interpreted not as a loan not as a subsidy.
o There is a difference in what is claimed at the banks and what has happened on
ground in terms of information dissemination.
Aggravation of the aforementioned problem due to uncooperativeness of bank officials
towards the rural end beneficiaries.
o Discrimination with the rural folk: They are being treated unjustly, no proper
address to their apprehensions and queries.
Delays in last mile implementation: Significant number of people have not yet received
passbooks and debit cards. Its been more than 5 months in the case of Iqbal.

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Findings from Bank VisitThe branch of Baroda Grameen Bank which is located right opposite ALIMCO, had a lions
share of the bank accounts opened under the Jan Dhan Yojana scheme in the village of
Lodhar. Just to give a little background, this branch was the only bank branch we had seen in
modern times which still used old ledgers and paper to facilitate transactions instead of the
modern computerized banking technology we have grown accustomed to seeing lately. Also,
the building that housed the bank was dilapidated and small. The branch had seen close to
250 accounts being opened as part of the scheme (as of February 14th, 2015)
We conversed with bank officials to get a broader understanding of the bankers perspective
about the scheme. Conversation with them also brought several finer points of the scheme to
the fore which were clearly not discussed in the Prime Ministers introductory speech about
the scheme nor are in mainstream public debate on it. Heres a summary1. Old scheme rebottled and repackagedMr. Ram Niranjan Sharma, a cashier we met at the branch is baffled with this kind of media
attention received by this scheme. He told us that this scheme is like old wine in a new
bottle.
He told us that a scheme for opening up of no frills account was initiated by the congress
government too. Infact, RBI had also drawn a comprehensive plan to achieve financial
inclusion in a white paper in 2009. This scheme has only minute differences with the
previous one such as the accidental insurance cover rising from a quantum of Rs 50,000/- to
Rs 1 Lakh. He points out that instead of rebottling an old scheme which did not work and
going into an overdrive to enforce it on the poorest of the poor, the government could have
systematically analysed what went wrong with the earlier scheme.
Research from secondary dataHere is a finding which gives us a glimpse of what went wrong in the earlier financial
inclusion scheme - In 2009, deposits mobilised in rural bank branches was a mere 9% of the
total deposit mobilised by banks and the share of rural credit in total credit of banks was even
lower at 7%.
An Economic Times report has summed the reason up very succinctly- If four decades of
banks' nationalisation, hundreds of co-operative banks, thousands of regional and rural bank
branches, non-banking finance companies, chit funds, lead area banks, foreign banks, private
banks and, of course, the crisis-hit microfinance institutions, could not take banking to more
than half the population, then there is something vital that is lacking with those people.
Money. Why would anyone with no money operate a bank account?[2] And yet, the
government has refused to answer these fundamental questions and has placed its blind faith
in the ludicrous assumption that financial inclusion can be achieved by opening a zero
balance bank account.

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2. Here is the fineprint, hitherto unseen and unheardEven the bankers agree that there is very little knowledge about the fineprint of this scheme
in public domain. Mr. Sharma was candid in admitting that a lot of account holders had a lot
of confusion about what this scheme had to offer. He starts off with dispelling the myth about
a zero balance account by saying that it does not mean that no cash should be kept in the
account. This account like all others should have transactions on a regular basis otherwise it
will become dormant. This scheme, he says although does offer opening of bank accounts
with relaxed KYC (Know Your Customer) norms but accounts with partial KYC compliance
will only be allowed limited number of transactions. Also, only KYC account holders are
eligible for subsidy transfer linked with these accounts. Thus, it is evident, that in the urge to
gain political mileage, a very rosy picture has been painted for the masses with the thorns
conveniently absent from the presentation.
Research from secondary dataPriya Basu in her book titled Improving Access to Finance for India's Rural Poor[3] says that
70.8 % of rural households with bank accounts access them less than once in a month. With
this staggering infrequency in operating bank accounts, expecting regular transactions to keep
accounts operational is asking a bit too much.
3. Overdraft facility not particularly helpfulThe scheme, as mentioned in the introduction above offers an overdraft facility worth Rs
5000/- to an account holder which essentially means that he can take a loan from the bank
with a nominal interest rate of 10.5%. Mr. Sharma felt that this overdraft facility was too little
and would not be used by more than 10% of the account holders.
4. Financial and operational pressure on banksOur conversation with the branch manager of SBI, IIT Kanpur led us to an annual operational
figure of managing an account, which lies somewhere close to Rs 400. With millions of
accounts being dormant and thereby not producing contributing in the revenues of the bank at
all, one can make sense of why the banks would be hesitant in following the governments
diktat to open no frills bank account as shown in the Tehelka Video.
Mr Sharma at the Grameen Bank also highlighted the manpower crunch and subsequent over
piling of work on the existent underpaid workforce. He said that the banking industry has
been overlooked by the sixth pay commission and opening salaries in public banks are less
than higher secondary teachers in government institutions who dont even have to take
classes to earn the pay.

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The Broader Picture: Loopholes/Roadblocks in the actual success

1. Unwillingness on part of private banks to open accounts in the JDYFor the bank officials, the scheme inevitably brings interaction with rural, uneducated folkserving whom is still an uncomfortable transition for banking officials. A sting operation by
Tehelka Operation Jan Dhan in 10 different banks in the National Capital Region has
uncovered the unwillingness of the bank officials. All the 10 banks visited under this expose
(which are both public and private), refused to open the bank accounts for the marginalized
and poor ones. Officials in order to keep the marginalized away from opening the accounts
have manifested different reasons. Some of the responses of bank officials as to why the
account cant be opened under this scheme are mentioned belowHumare yehan toh form khatam ho gye hain, kisi aur bank mein jaake khol lo.
Aadhar Card ke bina account nhi khul payega, Aadhar is a must.
A few responses were very candid and give an insight into the unwillingnessBank bhi toh fayda dekhti hai. Isiliye bank cream ko pakadna chahti hai. Gareeb log kitna
paisa daalenge account mein, hazaar, do hazaar? Isse bank ko kuch faayda nhi hone waala
hai.
Sir aap ye dekho ki agar bank aapki maid aur chowkidaar jaise logon ke account kholegi
toh aap jaise log jo 1 lakh se account kholte hain, aise logon ki bheed ki vajah se apna
account bandd karwa denge
Such excuses highlight the reluctance from the bank side, as they see no profit incentives in
opening the account of marginalized ones. This is indeed one of the major roadblocks for
financial inclusion of the marginalized people.
2. Opening bank accounts for domestic migrant workers:
Under the scheme, domestic migrant workers are just supposed to submit a written
declaration of the changed address. Though this might seem beneficial for the migrants, but
on the ground there have been misinterpretations among the bank officials, and even migrant
labourers are unaware about the flexibilities which the scheme facilitates to them.
Sting by Tehelka records a bank official saying, Migrant labourers ke account unke
permanent address pe hi khulenge. Yahan nhi khul sakte.
Thus a majority of Indias poor that categorize as migrant labourers (around 4.5 million) are
being deprived of the facilities of this scheme.
3.

Opening bank accounts of people from the neighbourhood:

The sting exposes yet another way in which banks are refusing to open accounts, saying that
if the residence does not fall under a neighbourhood ward, they wouldn't open the account.
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The scheme has no such restriction. Somebody having an address in say any part of Delhi can
easily open an account in Ghaziabad or anywhere else.
This tactic by bank officials bottlenecks the scalability of the scheme. Either the bank
officials are unaware or are giving false reasoning. Either way, it hurts the common man.
4. Bunch of excuses and some moreThe range of excuses that the banks are giving for their inability to open bank accounts is
baffling. One bank official is caught on camera refusing to open the account on weekdays,
saying that accounts can only be opened in camps on weekends.
Some banks have not even tied up with RuPay Debit card and therefore not been able to offer
accidental insurance cover. Though the banks have issued significant percentage of RuPay
Debit card to the account holders, but they have indeed not reached the beneficiary, thus
resulting in delay of last mile implementation and provisioning of intended benefits.
5. Fundamental flaw in the Banking Correspondent model of the schemeA business correspondent is a representative of bank who provides doorstep banking services
through the use of smart card handling devices that can identify the bank customer through
fingerprints and facilitates basic transactions such as depositing and withdrawing cash and are
connected to the main servers of the bank. Banks can use the services of NGOs, microfinance
institutions, non-banking finance companies and post offices as BCs.
This business model has proven to be a failure in the past. The RBIs annual report for 201314 notes that nearly 248,000 BC agents had been deployed by banks as on March 31, 2014,
out of which nearly 47% are conspicuous by their absence [4]
And the reason for untraceability of BCs is a lack of adequate monetary incentives among
them. Just to give the math, a BC earns 2% commission on each transaction. Considering the
extraordinarily low volume and size of transactions at the level of customers that the JDY
scheme targets, an average BCs monthly commission income roughly comes out to be Rs.
2000. JDY relies heavily on the BC model for expanding banking network in both rural and
urban areas. Clearly, this is a flawed incentive structure for such an important entity in this
scheme. For such a small amount, it is impractical to expect a BC to visit villages or slums at
regular intervals, open new bank accounts for poor people, process financial transactions,
educate customers about banking services and answer all queries of the customers. The high
attrition rate among BC agents across the country mentioned above is a clear consequence of
this.
Under the JDY, the BCs will get a minimum compensation of Rs.5000 per month. This is a
welcome move but there are several other important factors which act as a barrier in the
delivery of banking services through BC model. Some of these factors include:

15

 Biometric identification devices given to BCs very frequently dont work properly
due to technical problems or poor network connectivity. Thus, there is a huge waiting
period for a transaction to happen, leading to scores of people waiting at a given time.
Poor governance and inadequate supervision of BCs is another problem. Numerous
instances have been reported of BCs asking for a separate 200-300 rupees as service
charge/commission(although no bank or RBI has authorized such payment) for
opening up of a bank account, withdrawing cash or for loan processing.
Due to the aforementioned, there is a lack of trust in the BCs and they are given an
inadequate amount of cash to handle on a daily basis. As a consequence, they are
often short of cash when too many withdrawals happen frequently.

6. The gamut of identification: Problems with AadharAs mentioned in the Tehelka sting, most banks are asking for Aadhar as a supporting
identification and residential proof for opening of a PMJDY account. Also, the BCs would
match the thumb print and retina of the account holder with the biometric print already stored
in the Aadhar database when a transaction has to be facilitated. In this regard, the Aadhar
card is thus a very concrete part in the successful functionality of this scheme.
What is troubling though, is that this very ambitious scheme for a pan Indian identification,
launched by the Congress government in 2010 is beset with all sorts of problems. As reported
by outlook, Labourers and poor people, the primary targets of the Aadhar process, often do
not have clearly defined fingerprints because of excessive manual labour. Even old people
with dry hands have faced difficulties. Weak iris scans of people with cataract have also
posed problems. In several cases, agencies have refused to register them, defeating the very
aim of inclusion of poor and marginalised people.[5]
Besides this, security concerns over data collection and leakage have always been present.
There have been numerous instances reported of fake Aadhar cards issued on bribes, multiple
Aadhar cards issued to the same person and severe logistical problems with the delivery of
Aadhar cards- with instances of finding thousands of Aadhar cards in waste drains etc
reported heavily in the mainstream media. Taking cognisance of the aforementioned
problems, the Supreme Court of India had passed an order in September, 2013 directing the
centre and states not to insist on Aadhar for granting social security benefits. In light of the
above, its paradoxical then, that the JDY scheme would have Aadhar as the central document
for identification.
7. Scope of corruption at each stageAs our field findings have verified, there is large scale corruption happening at the last mile
for this scheme. Bank officials have told us, that although this scheme allows for only one
account per poor household, they have seen multiple JDY bank accounts opened in the same
family. Mr Sharma told us- Car se log aate hain aur Jan Dhan Yojana mai account
khulwate hain. Farzi Aadhar card se account khulta hai aur fir subsidy milti hai. Haal ye hai
ki ladke ke account mai kanya vidyadhan yojana ka paisa aa raha hai. Multiplicity of bank
16

accounts allows for extended overdraft facility, extended insurance cover and a plethora of
illegal cash transfer benefits.
There are numerous other avenues of corruption in this scheme. As mentioned above,
Business Correspondents are charging money for performing routine transcations. The
scheme also allows the opening of a bank account for a particular person on the request of the
Pradhan of the village. Mr. Sharma told us that due to this provision, there have been several
instances of pressure exertion by Pradhans for the account opening of their kith and kin under
this scheme.
8. Insurance thuggery in small fontsA report [6] shared by Prof Varman with us brings forth the shocking fineprint of the glitzy Rs
1 lakh accidental insurance cover offering which was highlighted extensively in the PMs
opening speech. The family of Avinash Singh, from Dehradun, realized that the benefit of
insurance will be available only to those who have the RuPay debit card (issued under
PMJDY) and have carried out minimum one successful financial or non-financial transaction
45 days prior to premature death. This was a fineprint that was never disclosed in PM Modis
speech nor has been highlighted anywhere in the media.
It is ironic then, that in a country where accidental deaths are so common (about 16 people
die and 58 are injured every hour in road accidents in India), a scheme which promises
accidental insurance cover and caters to 14.7 crore people has not settled a single insurance
claim till date. It is ironic then, if the use of debit cards has been made mandatory for seeking
insurance cover that debit cards and passbooks to a sizeable chunk of account holders haven't
even reached them yet. The rationale behind the aforementioned condition can also be
explained very simply. The National Payment Corporation of India which is the debit card
issuing authority is also the one which is liable to pay the premium for the insurance cover of
each and every account under this scheme. Since their revenues are driven by how frequently
the card holder swipes the card, it is understandable why they would not want to compromise
on this strategy even when the account holder dies an accidental death.

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Analyzing the behaviour of corporations1. Banking institutions selective approach in financial inclusionAs the sting operation by Tehelka exposed the unwillingness of banks in opening up of bank
accounts under the scheme, it highlight the reasons of low excitement among banks regarding
the scheme. One of the major reason in their reluctance is the scale of profitability associated
with the scheme. The scheme envisages to bring in the marginalized section under the ambit
of financial inclusion, but this will hardly bring any significant profit for the banks. Infact,
banks are supposed to bear the operational costs. This has resulted in their selective address
to the customers- creamy ones, who can bring about revenue and profit for them.
Attaining the targets set by the government have imposed the burden over the banks have
resulted in false claims from the bank side. False reasoning to avoid the opening of undesired
account has brought a behavioral shift towards the scheme.
2. Selective willingness of financial institutions to involve themselves with financial
inclusionWhile we highlighted the passivity of private financial institutions in this scheme, we would
now like to bring forward another interesting aspect, which is the sudden flow of private
capital in a specific area of financial inclusion- microfinance. The microfinance sector in
India is brimming with private investment with major players such as SKS Microfinance,
Janlakshmi and Equitas raising as much as approximately 200 million $ of venture capital in
the year 2009.[7]
It is interesting to analyze why the private financial institutions shirk from one aspect of
financial inclusion while get engaged extensively in another. Profitability is again the
central force in play here. The higher Return on Equity(RoE) ratios on equity investments
and higher interest on debt investments have really caught the interest of investors and even
private banking institutions who are actively targeting the rural small size lending segment.
The consequence of this profitability overdrive is very severe. Microfinance,which began on
the fundamental idea of bringing easy credit at nominal interest to the farmers. fishermen and
small business owners who otherwise had no access to credit, has now become another way
to extort the poor. In the disguise of what is known as flat interest rates, poor people are
ending up paying an aggregate interest rate as high as 45%[8].From the loan sharks to MFIs,
its like they have jumped from the frying pan straight into the fire.
3.

Insurance companies-

Several important aspects of the linkage of the scheme with the insurance companies have
been highlighted in an RTI filed by one Mr. Gaur from Madhya Pradesh[9].. The RTI
illustrates the nature of the tie up between NPCI and HDFC ERGO( the insurance provider).

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The one year agreement which was signed on April 1, 2014 could not even decide the
quantum of premium NPCI had to pay for each JDY account. Infact, when the applicant
asked in the RTI how much amount of premium the insurers have made available for
accident insurance to the account holders linked with PMJDY, NPCI refused to reveal, saying
it is not in public interest and its commercial interest to disclose the information The Union
Finance Ministry replied to another RTI and confirmed that the terms of the premium had not
been set as on Feb 19,2015.
To add, in a recent turn of events. HDFC ERGO has refused to renew its contract on April 1,
2015 and New India Assurance Limited, a public sector company has now become the
insurer for the JDY accounts, starting this financial year. Mr Tewari gave us a little more
perspective on this, telling us that this is primarily because of the sham in opening up of
accounts. With relaxed KYC norms and with the faulty Aadhar machinery, very little due
diligence has been done at the time of account opening, and therefore evaluating insurance
claims linked to accounts like these would be very hasslesome. Mr. Tewari also told us that it
is the unce rtainty of regular premium payment that a partnership with a government body
like the NPCI brings in that made HDFC catch cold feet.
This again highlights the heightened calls for minimization of risk when it comes to the poor.
It is surprising how the appetite for risk in banking institutions increases manifold when it
comes to lending to corporate houses like Kingfisher when even airline stationary and seats
are raised capital against.

The role of governmentThe fundamental responsibility of the state is to ensure social security. By social security, we
mean schemes which benefit the society at its grassroots. The current wave at the central
political level is very anti social security to its core. The right wing central government
instead of utilizing the full majority it has for pushing developmental schemes through is
playing to the demands of the corporates. We see that happening with the Land Acquisition
Bill and with several other schemes such as these.
The anti-social security wave that is flowing at the centre affects this scheme too. We can see
that in the governments compliance with the excessive NPCI demand to ensure a minimum
45 day account operational limit mentioned earlier in this report as a must to avail insurance
benefits. We see that again when the private banks refuse to cooperate with the government
in ensuring the opening of accounts under this scheme.

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Relating it to the course: The Friedmanian perspective

Earlier in the course, while trying to situate business in the socio-political milieu, we studied
in depth about a philosophy proposed by the high priest of neoliberalism, Milton Friedman.
And that philosophy was aptly titled Social responsibility of a business is to (only) increase
its profits. Friedman argued that a corporation is an artificial person and therefore has
artificial responsibilities, the most important one being creating wealth and value for its
shareholders. Friedman goes on to further demand minimalist state control in the functioning
of corporations because according to him the free market mechanism works best in the
allocation of resources.
In the context of this study, we see the Friedmanian perspective being fully espoused by
financial institutions when they refuse to open bank accounts under this scheme or shirk from
renewing insurance contracts for ensuring profitability which is sacrosanct and should be
protected. To borrow from Prof Varmans article[10] espousing the Friedmanian perspective is
like demanding for rights without admitting responsibilities.
It is ironic that the financial corporations argue for minimal state control in light of the
extensive rights and liberties granted to them by the state itself. From eminent domain to tax
breaks to limited liability, these liberties are innumerable. The banking industry has been
treated even more cosily when we talk about liberties- we have seen how in the United States,
J.P Morgan and his partners ran a parallel bureaucracy in deciding which investment projects
were to be undertaken- so much so for minimal state control.
Coming to India, the situation is similar to that of the U.S. On one hand do we see, huge debt
lendings to the tune of Rs 7000 crores by a consortium of 17 public banks, being made to
corporate houses like Kingfisher, out of which only 6 crore has been recovered till date[11].
And on the other hand, to cover these Non-Performing Assets and make similar investments,
the government influxes an astronomical sum of public money to the tune of Rs 1.68 lakh
crores. [12]
Public investments and public bailouts have thus been routinely doled out to financial
corporations and not one word was uttered on state control. The free market mechanism
which ostensibly figures in every defence of corporate territory, if allowed to run its course,
would have led to the death of corporations like Kingfisher.

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ConclusionThe test of our progress is not whether we add more to the abundance of those who
have much; it is whether we provide enough for those who have too little.
- Franklin D. Roosevelt
And in providing enough to those who have too little is where we think the Jan Dhan Yojana
scheme has a lot to do. We have looked at highly shocking numbers above, which we would
like to substantiate with a study conducted by World Bank[13] which compares India with
the other economies of the world as far as financial inclusion is concerned.

As we can see, India ranks very poorly on several fronts, be it bank branch density, bank
deposits or accessibility for bank credit. With the state of affairs being this, we feel that the
country needs more than just photo-ops to realise the long standing dream of complete
financial inclusion in the strictest sense. Instead of focussing on just speedy opening of bank
accounts, the focus should be to ensure delivery of all operational facilities associated with
these accounts and much more importantly, focus is needed on the generation of wealth at the
grassroots which would prevent these accounts from being dormant. Otherwise, this scheme
would turn out to be just another addition to a series of schemes that have failed miserably at
the grassroots.
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Learnings from the project

Macroscopic study of the flagship scheme Pradhan Mantri Jan Dhan Yojana along with
the microscopic analysis of the ground realities supported by the secondary information
provided us with the broader picture of the current scenario of the scheme.
Village immersion and the interactions enlightened the differences in the claims of the
performance and its ground implementation, and how these marginalized target
beneficiaries are discriminated in the so called liberal democracy.
Personal interactions with the bank officials gave us the perspective of banking
institutions on how political pressure can undermine the very objective of profit making
of these business institutions. In consequence, how these institutions manifest with the
moral principles in order to attain their personal interests, i.e. profitability.
Learnings from the class curriculum provided us with the tools in understanding the
relationships between different stakeholders- government, banking and other corporate
institutions, and the commons (target beneficiaries), and how the conflicting goals of
different stakeholders can undermine the very spirit of business and thus resulting of
associated behavioural and social costs.

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References[1] PMJDY official brochure

http://financialservices.gov.in/banking/PMJDY%20BROCHURE%20Eng.pdf
[2] RBI, Banks warming up to financial fitness
http://articles.economictimes.indiatimes.com/2010-11-17/news/27622578_1_bankaccount-area-banks-banking-system
[3] Basu, Priya. Improving access to finance for Indias poor
[4] Mrunal: An independent blog
http://mrunal.org/2014/10/banking-pm-jan-dhan-yojana-account-salient-featuresbenefits-limitations-criticism.html
[5] Outlook: Aadhar- A few basic issues
http://www.outlookindia.com/article/Aadhar-A-Few-Basic-Issues/279077
[6] Jan Dhan Yojna: The fineprint Modi did not disclose
http://www.downtoearth.org.in/content/jan-dhan-yojana-fineprint-modi-did-notdisclose
[7] Microfinance firm Janalakshmi raises funding from TPG and existing investors
http://www.vccircle.com/news/micro-finance/2014/11/28/microfinance-firmjanalakshmi-raises-funding-tpg-and-existing
[8] Mitra, Subrata Kumar, Exploitative Microfinance Interest Rates
[9] Jan Dhan Yojna: The fineprint Modi did not disclose
http://www.downtoearth.org.in/content/jan-dhan-yojana-fineprint-modi-did-notdisclose
[10] Corporate Personhood: Rights without responsibilities
http://infochangeindia.org/corporate-responsibility/analysis/corporate-personhoodrights-without-responsibilities.html
[11] DNA: Did Kingfisher money disappear in Mauritius?
http://www.dnaindia.com/money/report-did-kingfisher-money-disappear-in-caymanmauritius-2061656

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[12] The Hindu: Nod to dilute stake in public sector banks

http://www.thehindu.com/business/budget/nod-to-dilute-stake-in-public-sectorbanks/article6680448.ece
[13] World Banks Financial Access Survey results
http://tmgt.lsrj.in/SeminarPdf/238.pdf

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