Over the last year, data suggested that Prime Minister Narendra Modi's flagship financial inclusion scheme, the Jan Dhan Yojana, was starting to be more successful since the number of zero-balance accounts was steadily coming down. A closer look reveals that this reduction is partially the result of banks themselves putting tiny amounts of money into the accounts, as the Indian Express reported on Tuesday. Worse, banks now even seem to be requiring customers to deposit some money before accounts can be even used, all in an effort to lower the number of zero-balance accounts.
The Jan Dhan Yojana has been sold as one of Modi's most successful schemes, with crores of new bank accounts opened across the nation in an effort to bring on board those who, until now, were unable to access banking services. Although the Modi government said it had done better than previous efforts at financial inclusion, data suggested a vast number of these were accounts with zero balance. Over the last year, however that number had come down.
On Tuesday, the Indian Express published reported that 18 public sector banks have as many as 1.05 crore Jan Dhan accounts with just Re 1 as balance, according to Right to Information requests filed by the paper. The newspaper reported from six states and found that banks themselves were putting a token amount in dormant accounts citing “pressure” from authorities to reduce the percentage of zero-balance accounts.
A bank official who spoke to the newspaper made it clear that the intention was to polish Jan Dhan's image. “There was a perception that so many zero-balance accounts means no one is using them, so there was pressure on us to change that,” the official quoted by the newspaper said.
According to the RTIs accessed by the Express, the top 12 banks with most number of Jan Dhan accounts have about 36% accounts with balances of less than Rs 10. In many cases, the customers themselves were surprised to see the money in the account.
Since the first big explosion of bank account openings after Modi first unveiled the Jan Dhan Yojana, there has been much scrutiny of the accounts with a focus on those with no money at all in them. The Express story reveals how this too needs context if bank officials were themselves putting money into the accounts to ensure they are not "zero-balance".
Figures over the last year do suggest that, from a high of 74% soon after the accounts were opened, the number of zero-balance accounts has come down to about 24% across the country, although remains at 36% in private banks.
The latest revelations, however, complicate this data because it brings up the question of whether even those accounts that are not zero-balance are actually being used by customers. Anecdotal evidence in fact, suggests that the banks are going even further than just depositing money into accounts to show that they are not zero-balance.
Banking correspondents in Jharkhand, for example, claim that they face “pressure” from top officials to get money into the Jan Dhan accounts, and they are now passing those demands onto the customers.
Morpant Chaudhary, a banking correspondent in Tarup panchayat in Ratu in Ranchi district said that he had instructions from the branch manager at Bank of India in Ratu to ask Jan Dhan beneficiaries to deposit money in their zero balance accounts.
“A year back, the branch manager gave orders to issue passbooks to Jan Dhan beneficiaries only after they had deposited at least Rs 50 in the zero-balance accounts,” Chaudhary said. The branch manager of Bank of India had not issued any written orders and these instructions were conveyed orally, he added.
“Most people deposit no money in their bank accounts. If they receive any payments, such as their monthly National Social Assistance Program pension of Rs 600, they wish to withdraw it immediately for their expenses,” Chaudhary said.
Banking correspondents in Ranchi and Latehar said zero balance accounts are often “frozen” when there are no transactions over six months. They had to then re-open the accounts starting from scratch, asking beneficiaries to re-submit proof of identity and residence, which was time-consuming.
Making things worse, reports also suggest that a large number of Jan Dhan Yojana accounts are mere duplicates in that they belong to people who already had accounts previously.
“Our preliminary estimation shows that around 25% of accounts are repeat or multiple accounts opened by people already holding accounts in different banks,” GS Sandhu, Secretary (Financial Services) in the Ministry of Finance, told a gathering in New Delhi in September, 2014.
Jan Dhan may have helped the government establish a Guinness World Record for opening 18 million accounts in a week, but the flagship scheme is yet to truly achieve the dream of financial inclusion.