DBT, RuPay critical for ‘meaningful’ financial inclusion

Technology will play a big role in fostering greater engagement of the hitherto excluded with the financial system


The Pradhan Mantri Jan-Dhan Yojana (PMJDY) is arguably one of the major initiatives of the Narendra Modi-led government. While successive governments have in the past tried to cover the unbanked section of the population, the PMJDY has actually managed to make significant headway and that too at breathtaking speed.

But, “unless the Direct Benefit Transfer (DBT) programme and the usage of RuPay cards pick up steam, there is every danger that these well-intentioned accounts opened with such enthusiasm might remain operative” says M S Sriram, professor at IIM Bangalore, in a new report.

In the report titled Inclusive Finance India Report 2015, Sriram argues PMJDY’s success, unlike past programmes, is because it took “the issue of inclusion from a supply side – passive architecture-building project to the next level – the saturation of the demand side by adopting both push and pull strategies.”

DBT, RuPay critical for 'meaningful' financial inclusion

The programme also received a boost with the Reserve Bank of India (RBI) accepting eKYC. In the past, a big constraint on enhancing financial inclusion was identification. In the absence of documents, the poor were simply unable to open accounts. But Sriram argues this problem was dealt by making Aadhaar the centrepiece of strategy. “With RBI making eKYC an acceptable way of identity verification”, one of the biggest constraints to enhancing financial inclusion was addressed. This also lowered the costs of opening new bank accounts.

While Sriram credits the success of the programme in part to the attention to detail, monitoring and mid-course correction, he contends that to make inclusion more meaningful, these accounts should be made more “meaningful” for beneficiaries. This implies encouraging more transactions and ensuring that the DBT programme takes off.

Technology will undoubtedly play a big role in fostering greater engagement of the hitherto excluded with the financial system. Data from RBI show that transactions through mobile phones have increased from 0.84 billion in 2011 to 169.14 billion in 2014. While growth has been explosive, it remains a minuscule part of the overall transactions. Sriram is optimistic that with new players coming and changing the rules of the game, this segment could potentially grow fast.