The average deposit per account under Pradhan Mantri Jan Dhan Yojana – a financial inclusion programme launched by Prime Minister Narendra Modi in August 2014 – increased 118%, from Rs 795 in September 2014 to Rs 1,735 in May 2016, according to IndiaSpend's analysis of government data.

The number of Pradhan Mantri Jan Dhan Yojana accounts quadrupled (increased by 308%), from 53 million in September 2014 to 219 million in May 2016, while the proportion of accounts with no money in them – called zero-balance accounts – declined from 76% in 2014 to 25.7% in 2016.

This indicates that more Indians are being included in the formal financial system and are willing to keep their earnings in Jan Dhan accounts. Payments from the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and subsidy for liquefied petroleum gas also come in to those accounts.

Pradhan Mantri Jan Dhan Yojana deposits increased nearly eight-fold (790%), from Rs 4,273 crore in September 2014 to Rs 38,048 crore in May 2016.

However, the average deposit in accounts apart from those with no money (zero-balance accounts) declined 32% – from Rs 3,427 to Rs 2,333 over the same period – showing that account holders are putting in less money into their bank accounts than they did.

“One of the basic things said against financial inclusion is that when the poor open bank accounts, the large majority of these accounts are actually zero-balance accounts and there are no transactions,” Dr Alok Pande, Director (Financial Inclusion) and Additional Mission Director, Pradhan Mantri Jan Dhan Yojana, said in August 2015. “In camp mode (when depositors were being signed up), banks had tables, a few people, chairs and forms; there was no arrangement for collection of cash, deposit of cash, taking care of cash; so basically accounts were opened in zero-balance mode.”

“We persuaded banks to issue passbooks," he said. "You will not believe the dramatic impact; from about 79% in November [2014], zero-balance accounts dropped to 45% [in August 2015]. One of the major things that created the push was that people love to see their own photograph, name, address in a passbook.”

“Direct benefit transfers from the government are coming through these (Jan Dhan) accounts," said Madan Sabnavis, Chief Economist, CARE Ratings. "So, zero-balance accounts have come down automatically as money is put in these accounts. The average balance in non zero-balance accounts has come down as people withdraw money from it and are still not used to the banking habit. Jan Dhan shows that the challenge for the system is to create this business of banking habit.”

“In China, the amount of money that goes through the formal sector (banking) is around 70% and the informal sector (moneylenders) is 30%,” Soumya Kanti Ghosh, chief economic advisor, State Bank of India, told IndiaSpend. "The case is exactly the opposite in India, with only 30% going through the formal sector and 70% through the informal sector. Jan Dhan accounts will channelise these transactions through formal accounts or the banking system, which will help banks to provide the right products to the right person, leading to better financial inclusion.”

Subsidy payments

Zero-balance accounts will decline as subsidy payments increase, said Ghosh.

In 2015-16, the government transferred Rs 61,824 crore ($10 billion) to 310 million beneficiaries of 59 central schemes, such as National Social Assistance Programme, Post Matric Scholarship For Scheduled Tribe, Fellowship Schemes of All India Council for Technical Education and Janani Suraksha Yojana.

India created financial history opening 18 million bank accounts in a week (between August 23 and August 29, 2014), setting a Guinness World Record.

How the states stack up

The island territory of Lakshadweep has the maximum average deposit per account – Rs 8,824 – and the maximum average deposit per non zero-balance account – Rs 12,540.

Mizoram has the least average deposit per account, Rs 646, and the least average deposit per non-zero-balance account – Rs 998.

Jammu and Kashmir had the largest proportion of zero-balance accounts – 41.5% – on May 25, 2016, followed by Chhattisgarh (38%), Nagaland (36.4%), Andaman and Nicobar Islands (35.3%) and Mizoram (35.2%).

Chandigarh has the least zero-balance accounts – 13.9% – followed by Himachal Pradesh (14.6%), Tripura (15%), Goa (16.3%) and Punjab (17.5%).

Financial inclusion

About 40% of India’s population is now outside the purview of formal banking.

Only 145 million households (58.7%) of 247 million in the country had access to banking services, according to Census 2011 and 91 million rural households used the banking system, as did 53 million urban households.

As many as 219.3 million Pradhan Mantri Jan Dhan Yojana accounts were opened as on May 25, 2016, of which 134.7 million are rural and 84.6 million are urban accounts.

This article first appeared on IndiaSpend, a data-driven and public-interest journalism non-profit.