Definition:

• Financial Inclusion is a process of providing access to appropriate banking and financial products and services for the vulnerable groups at an affordable cost. 
• The target groups are women, low income groups, marginal farmers, urban slum dwellers, socially excluded groups,etc.
• The launch of the Pradhan Mantri Jan Dhan Yojana(PM-JDY) in August 2014 was a significant step in this direction. As per the latest data, around 53.1 crore accounts have been opened under the scheme. 

Role of PM-JDY in financial Inclusion:

• Massive Inclusion: Over 53 crore accounts have been opened, with a significant number in rural and semi-urban areas (67% of the total accounts), which has helped bridge the rural-urban banking gap.
• Gender Inclusivity: The scheme has also been instrumental in narrowing the gender gap, as 56% of PMJDY accounts are owned by women.
• Enhanced Savings: The total balance in these accounts has grown significantly, reflecting increased trust in formal banking. The average balance per account quadrupled from Rs 1,065 in 2015 to Rs 4,352 in 2024.
• Social Benefits: Jan Dhan accounts offer a variety of features like overdraft facilities, insurance coverage, and direct benefit transfer (DBT) for various government schemes, enhancing financial security.
  • The PMJDY accounts have enabled efficient DBTs, reducing leakages and ensuring direct transfers to beneficiaries’ accounts. As of 2024, Rs 38.49 lakh crore has been transferred via DBT, saving Rs 3.48 lakh crore in leakages.
• Behavioural Impact: A research report by State Bank of India(SBI) indicates a reduction in crime rates and consumption of intoxicants in states with higher PMJDY penetration.
• Digital Payment Systems: The growth of UPI (Unified Payments Interface) has complemented financial inclusion efforts, with small-ticket transactions allowing low-income households to participate in formal financial transactions.

Measures to improve Financial Inclusion:

• Strengthening the Financial Ecosystem: Promote private sector involvement through partnerships to expand financial services.
  • Build the capacities of individuals and small enterprises by offering financial literacy and incubation programs.
  • Ensure financial services are gender-inclusive and designed to meet the unique needs of women.
• Increasing Penetration of Financial Products: Expand access to micro-insurance, credit, and other financial services in a cost-effective manner.
  • Introduce innovative products like the Unified Lending Interface to improve the accessibility, efficiency, and affordability of credit products without leading to over-indebtedness.
  • This expansion should be mindful with consideration to the 
• Enhancing Consumer Protection: Strengthen consumer protection frameworks to maintain trust in digital financial products and services.
  • Adequate protections should be ensured for the new entrants into the financial system.
• Customer-Centric Product Design: Financial products should be tailored to the unique needs of PMJDY account holders, many of whom have seasonal and erratic income streams.
  • Develop products that reflect the lifecycle needs of low-income customers, enabling their long-term financial inclusion and economic empowerment.

Conclusion:

• Financial inclusion can be a valid path towards inclusive development. India has, so far, performed well in this area and the need is to utilise this good base and promote all round development.