PM Modi Has Opened Bank Accounts, But What of Financial Inclusion?
While account ownership has grown rapidly in the NDA regime, thanks to the PMJDY, what about financial inclusion?
While account ownership has grown rapidly in the NDA regime, thanks to the PMJDY, what about financial inclusion?(Photo: Shruti Mathur/The Quint)

PM Modi Has Opened Bank Accounts, But What of Financial Inclusion?

Prime Minister Narendra Modi, while addressing an election rally in Meerut on Thursday, 28 March, took a dig at the Congress party's NYAY scheme, claiming that "those who didn't open bank accounts for decades are now promising to deposit money in those accounts."

Now the Congress has promised to deposit Rs 6,000 per month into the bank accounts of the poorest families of the country if voted to power in the Lok Sabha elections.

Targeting the scheme, the prime minister claimed that the Congress, in all its years in power, had "never opened any bank account", raising the question of financial inclusion.

We decided to take a look at the penetration of bank accounts in the UPA regime vs the NDA regime to see if PM Modi's claims ring true.

What We Found

Citing data from the Global Findex database of the World Bank, an EPW article, penned by Hasina Daya and Philip Mader, notes that in 2011, around 35.2% of the Indian population over the age of 15 owned bank accounts, then rising to 53.1% in 2014.

In 2017, 79.9% had a bank account.

Notably, the jump to 79.9% in 2017 meant that the NDA had managed to maintain the momentum gained by the UPA in its regime – both jumps were a 50% increase on the previous number of bank account-holders.

In other words, the pace of opening bank accounts was almost identical in the last three years of the UPA II and first three years of the Modi regime.

In fact, Daya and Mader note that this could also be taken as a "success", considering that the NDA had managed to convert harder-to-access non-users into bank account holders.

But does this translate into success in terms of financial inclusion?

What Is Financial Inclusion?

A buzzword incidentally used quite often during the Manmohan Singh regime, financial inclusion is defined by the RBI as "the process of ensuring access to appropriate financial products and services needed by vulnerable groups such as weaker sections and low-income groups at an affordable cost in a fair and transparent transparent manner by mainstream Institutional players."

According to the Committee on Financial Inclusion chaired by Dr C Rangarajan, the term did not just limit to opening bank accounts, but also meant "access to services and credit."

Where Does NDA Stand On Financial Inclusion?

While some of the success the NDA has had in terms of access to bank accounts can be credited to the introduction of the PM Jan Dhan Yojana, several of these accounts continually have low balances or are even zero-balance accounts.

In fact, the 2017 Findex survey found that only 6.6% of the respondents saved at a financial institution, a big dip from the 7.7% in 2011 and only a marginal increase from the 6.4% in 2014.

Similarly, despite the Modi government’s demonetisation move in 2016, increase in debit card ownership between 2014-17 stood at a meagre 50%, compared to the whopping 265% increase between 2011-2014.

Thus, although account ownership might have grown rapidly between 2014-17, the more meaningful metrics of credit and saving behaviour, etc, which are included in the concept of ‘financial inclusion’ appear to have been a failure, the EPW article noted.

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