Twelve years after its launch in August 2014, the Pradhan Mantri Jan Dhan Yojana (PMJDY) stands as one of the largest financial inclusion drives in modern economic history. With more than 55 crore basic savings bank accounts opened and cumulative deposits exceeding ₹2.5 lakh crore, the programme has reshaped welfare administration in India. By connecting the unbanked to the formal banking system, the state built an efficient digital pipeline for Direct Benefit Transfers (DBT), plugging leakages in rural welfare delivery, fertiliser subsidies, and disaster relief. Yet, celebrating universal account ownership risks confusing administrative access with real economic empowerment. A bank account that acts merely as a conduit for government welfare is not the same as a functional financial lifeline. While Jan Dhan successfully integrated rural citizens into the formal financial ecosystem, it has largely been unable to transform that access into accessible, productive credit for the village economy.
The limitation of this model is visible in the everyday life of the rural informal worker. Consider a small vegetable vendor or tenant farmer in rural Bihar or Uttar Pradesh. She holds an active Jan Dhan account, maintains a modest balance of ₹3,000, and receives seasonal welfare payments through Aadhaar-linked transfers. When unseasonal rains damage her crop, she needs an immediate working capital loan of ₹15,000 to restart her business. Although PMJDY prominently advertises an overdraft facility of up to ₹10,000 without collateral, her local bank branch routinely turns down her request. Branch managers, often driven by non-performing asset (NPA) metrics, remain deeply hesitant to extend unbacked credit to informal borrowers lacking formal salary slips or land titles. Left with no institutional support, she returns to the village moneylender, paying interest rates of 3% to 5% a month (36% to 60% annually).
This credit gap creates a troubling macroeconomic paradox: A reverse flow of capital from rural villages to metropolitan centers. The tens of thousands of crores sitting in rural Jan Dhan accounts represent the hard-earned savings of low-income families. However, in many rural and semi-urban districts, the Credit-Deposit (CD) ratio of commercial banks remains well below 40%. Instead of recycling these rural deposits into local agricultural tools, dairy units, and small village retail shops, commercial banks treat Jan Dhan savings as low-cost funds to finance corporate loans, industrial infrastructure, and urban real estate. Rather than injecting capital into the rural economy, the formal banking network frequently acts as a vacuum, pulling small savings from the economic periphery to fund the prosperous ones.
{{/usCountry}}This credit gap creates a troubling macroeconomic paradox: A reverse flow of capital from rural villages to metropolitan centers. The tens of thousands of crores sitting in rural Jan Dhan accounts represent the hard-earned savings of low-income families. However, in many rural and semi-urban districts, the Credit-Deposit (CD) ratio of commercial banks remains well below 40%. Instead of recycling these rural deposits into local agricultural tools, dairy units, and small village retail shops, commercial banks treat Jan Dhan savings as low-cost funds to finance corporate loans, industrial infrastructure, and urban real estate. Rather than injecting capital into the rural economy, the formal banking network frequently acts as a vacuum, pulling small savings from the economic periphery to fund the prosperous ones.
{{/usCountry}}Furthermore, basic account maintenance continues to impose friction on the poor. In rural areas, banking is mediated primarily through business correspondents (bank mitras) and customer service points. When fingerprint scanners fail due to worn skin on farm laborers, or when national payment mapper links break, rural citizens often lose a full day’s wages traveling to distant brick-and-mortar branches to rectify the mistakes. In addition, ancillary charges—such as SMS alert fees, debit card renewal costs, and inter-bank ATM transaction penalties—frequently nibbles at tiny balances. When maintaining a bank account requires persistent bureaucratic effort and unexpected deductions, informal workers often withdraw their entire cash balance immediately upon receiving a government transfer, reducing the account to a dormant pipe.
Fixing this disconnect requires moving beyond account opening to active capital creation. First, the Jan Dhan overdraft facility must be transformed from an arbitrary branch-level discretion into an automated, rule-based credit line. By analysing the frequency and consistency of DBT inflows, UPI transaction velocity, and utility payments, banks can establish pre-approved overdraft limits through automated software, removing human bias and administrative reluctance at the branch counter. Second, commercial banks should be subject to strict, monitored district-level credit-deployment targets, ensuring that at least 60% of deposits mobilised from rural branches are re-lent to local micro-enterprises and farmer producer organisations.
Finally, public policy must integrate the Jan Dhan network with cash-flow based lending frameworks like the Account Aggregator (AA) ecosystem. Rural artisans, self-help group members, and small shopkeepers generate continuous, informal transaction histories that traditional credit rating agencies ignore. By converting verified digital payments and agricultural sales receipts into collateral substitutes, banks can underwrite small working capital loans at standard interest rates. A modern financial system cannot be judged solely by how many plastic debit cards it issues or how quickly the state can disburse relief funds. Genuine financial inclusion will arrive only when a Jan Dhan account gives a rural entrepreneur the capital, autonomy, and credit needed to build self-sustaining wealth.
(The views expressed are personal)
This article is authored by Piyush Kamal, honorary fellow, Institute for Educational and Developmental Studies.