How financial inclusion plays a critical role in the banking sector

55% of Jan Dhan account holders are women and 67% live in rural and semi-urban areas. (image file)

by Manoranjan ‘Mao’ Mohpatra

Recently, we celebrated the 7th birthday of Pradhan Mantri Jan Dhan Yojana (PMJDY). Since its launch in 2014, Jan Dhan has been the biggest driver of financial inclusion and one of the biggest financial inclusion programs in the world.

Well, it is. This is because more than 430 million bank accounts have been opened under this program since its inception, amounting to INR 1,460 billion. Of which 370 million, or 86%, are currently operational. Over the past seven years, Jan Dhan has financially included segments such as women and the rural population in the formal banking system, thereby empowering them to hold a bank account. Indeed, today 55% of Jan Dhan account holders are women, and 67% are located in rural and semi-urban areas. In addition, a total of 312.3 million RuPay cards have been issued to PMJDY account holders.

Thus, the figures mentioned above clearly attest that a significant shift towards financial inclusion is underway in India.

However, before delving deeper into initiatives leading to financial inclusion in the country, it is essential to understand what this means.

Financial inclusion is about providing banking services to all sections of society. Mainly, it helps to reduce the economic gap between rich and poor in order to lead the economic advancement of the country.

Initiatives in favor of financial inclusion

Among several initiatives promoting financial inclusion, JAM trinity (linking Jan Dhan accounts with Aadhaar and cell phone numbers) is one of them as it creates a holistic financial inclusion ecosystem. JAM trinity serves as an important vehicle for strengthening financial delivery mechanisms and social protection systems and also improving the effectiveness of several direct benefit transfer (DBT) programs.

For example, to benefit from plans like PM-KISAN or life and death insurance, the first step requires people to have a bank account – and this is what PMJDY provides.

In addition, Aadhaar makes it possible to identify and register beneficiaries, and mobile numbers make it possible to communicate with them by SMS.

At the same time, during the pandemic-induced lockdown, JAM was instrumental in helping to reach citizens staying in the far corners of the country. It is because of JAM that a total of INR 309.45 billion was credited to female PMJDY account holders during the Covid-19 lockdown.

Obviously, Jan Dhan, as the first step towards financial inclusion, followed by banking services like debit cards, insurance, pension plans, etc., brings the financially excluded segment into the formal banking system. . Today, the number of people using banks and ATMs has increased dramatically in both rural and urban areas.

In addition, Aadhaar Enabled Payment System (AePS) is another service aimed at facilitating financial inclusion in India. It helps withdraw money (financial aid received) from micro vending machines using Aadhaar number and fingerprint. By providing customer authentication, service availability, accessibility through the AePS channel, and accessibility as it’s free, AePS is undoubtedly playing a crucial role in the path to financial inclusion. In fact, the National Payments Corporation of India (NPCI) points out that the value of transactions through AePS has almost doubled to approx. INR 219.78 billion in January 2021 compared to INR 112.87 billion in January last year.

Role of digital payments in financial inclusion

For many SMEs, digital payment services like Paytm, PhonePe and Google Pay are becoming the first formal banking service. Even a small roadside kiosk now accepts payment digitally using a QR code. According to a recent survey by a merchant payment solutions company, India is expected to experience the fastest growing mobile payment transactions in terms of value, with a CAGR of over 20% between 2019 and 2023.

At the same time, the PM SVANidhi program offers an incentive or cash back to street vendors for the adoption of digital transactions. The network of credit institutions and digital payment aggregators such as Paytm, NPCI (for BHIM), Google Pay, Amazon Pay, etc. will help integrate providers for digital transactions. Integrated providers will receive incentives in the form of monthly cashback in the range of Rs.50 to Rs.100.


Even banks are behind the financial inclusion initiative by turning to digital banking. People living in remote areas and women are now better equipped with banking services through an online system. Traditional financial institutions are sparing no effort to move their operations online, allowing financial inclusion to expand its reach.

Overall, the vision is to bring more and more people – especially those who are underserved customers – into the formal financial ecosystem.

(The author is Managing Director of Comviva. Opinions expressed are personal and not necessarily those of Financial Express Online.)

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