If one goes by the numbers displayed on the Pradhan Mantri Jan-Dhan Yojana (PMJY) website, the financial inclusion scheme remains a huge success. At the end of September 2017, it reported 302.6 million beneficiaries with bank balance of Rs66,606 crore. These were being serviced by a vast army of 126,000 bank mitras, delivering branch-less banking. However, a closer look raises many questions about this three-year-old initiative launched with great fanfare. Of these, we know from reports that nearly 10 million accounts have no transactions. 

 

For starters, we do know that Jan-Dhan accounts were targeted to launder black money by using account-holders as money mules to deposit large chunks of tax-evaded cash. A response to a question in Parliament indicates that deposits in Jan-Dhan accounts, which stood at Rs45,636 crore on 9 November 2016,  had jumped to Rs71,036 crore on 28 December 2016. We have also seen innumerable media reports since then that the income-tax department has frozen all suspicious accounts with large deposits in these accounts. And, yet, a massive Rs4,430 crore has been withdrawn from these accounts. The steady increase in balances in these accounts (in the past) suggests that these are not normal withdrawals. Did they then escape the taxman’s eagle eye?

 

There are issues with opening of the new Jan-Dhan accounts too. No bank is willing to open these accounts anymore, not even private banks which have been extremely eager to please the government. We already know that nationalised banks have incurred a high cost for maintaining Jan-Dhan accounts. To a question in the Parliament, State Bank of India (SBI) had claimed that its cost for maintaining such accounts is Rs774.86 crore. 

 

However, The Times of India (TOI) has exposed another dimension to these accounts. In a report, it says that banks are taking advantage of the ‘vague wording’ of Reserve Bank of India (RBI) guidelines for basic savings bank deposit accounts, to impose restrictions on transactions or find ways to demand a minimum balance or levy charges if the four free transactions norm is exceeded. Free transactions include ATM deposits and withdrawals, online and point of sale transactions as well as standing instructions. The TOI report names top private banks for finding ways to charge Jan-Dhan customers for more than four transactions. SBI freezes the account after the monthly four-transaction limit is reached. The Bank recently agreed to allow economically weak customers as well as students and pensioners to convert their regular accounts into basic accounts with stringent restrictions, after a furore over its decision to impose huge costs for failing to meet minimum balance requirements. Charging Jan-Dhan account-holders for more than four transactions is a relatively new development. It has happened mainly due to RBI’s studious silence with regard to exploitation of bank customers and generated anger and confusion about bank charges. 

 

Interestingly, while banks insist on capping transactions on the claim of high costs, our sources tell us that banking correspondents (BCs), who earn a commission per transaction, have been encouraging needless deposits and withdrawals of the same sum of money to bump up their commissions. This information comes from a source who has worked with the biometric identification and enrolment agencies. Despite efforts, we were unable to verify whether this is happening routinely, or even in pockets, or get information about the action taken by banks in such cases, or the turnover of BCs employed by banks.  The Indian Banks Association has prescribed a minimum compensation of Rs5,000 per month, but the guidelines for engaging BCs say that BCs may be “incentivized on business volume/transaction/milestone basis, with stipulation of a minimum threshold limit, to encourage them for business development.”

 

More importantly, banks have been allowed to pay commissions to BCs in order sell ‘new products’ launched by them. Although BCs are not allowed to collect the commission directly from customers, the guidelines are clear that since the “delivery of services and products are at the convenience of customers, we may recover the incentives and commission from the customers such commissions/incentives.” BCs are also paid commissions for new products launched by banks for these rural folks who are the target of financial inclusion. In an environment where educated urban consumers have been subject to the most brazen mis-selling of financial products and services, it is anybody’s guess what is being sold to this vulnerable segment.