Digital disparity threatens achievements of financial inclusion under PM Jan-Dhan scheme

Access to banking is an essential aspect of economic development of a country. Since Independence, the government has taken several steps to ensure a bank account for everyone without any prejudice. The Pradhan Mantri Jan-Dhan Yojana (PMJDY), launched in August 2014, has been one such initiative. The scheme aims at opening deposit accounts in banks for every eligible individual who in the past couldn’t do so for not possessing ‘Officially Verified Know Your Customer’ documents. According to the NSSO 70th, round (January-December 2013) survey on Debt and Investment, only 68.8 percent rural households and 79.5 percent of urban households had deposit accounts in banks. A similar exercise was undertaken in the NSSO 77th round (January-December 2019). Unlike the previous survey (NSSO 70th round), the present survey has collected data at individual levels. Consequently, these results cannot be compared with the earlier one. Thus, progress made towards access to the banking sector during this period cannot be evaluated. A preliminary scrutiny of the 77th round shows that 84.4 percent people of age 18 and above in rural areas and 85.2 percent in urban areas owned deposit accounts in banks. In addition to the debt and investment survey, the NSS 77th round also collated information on ‘Situation Assessment of Agricultural Households’. The survey provides information on access to banking for agriculture households. It can be hypothesised that in contrast to urban households, rural households face deprivation and similar is the case of agricultural households viz, non-agriculture on most of the development indicators. According to this survey, 98 percent of agricultural households in India held deposit accounts with banks. Based on these facts, it will not be wrong to infer that comparable progress was achieved for non-agriculture households in rural and urban areas. Information on whether an individual with age 18 years and above owned a deposit account was collated in NSS 77th round debt and investment survey. The survey observed that brick-and-mortar banking services were equally accessible for rural and urban India; 84.4 percent people in rural India and 85.2 percent in urban India have deposit accounts in banks. This rural-urban equality was observed for male as well as female. It is 88.1 percent for rural male and 89.0 percent for urban male while for female it is 80.7 percent and 81.3 percent respectively. This equality is observed even across the social groups. (Chart 1). [caption id=“attachment_10226791” align=“alignnone” width=“640”]  Proportion of people age 18 and above having a deposit account in a bank (Chart 1).  Source: All India Debt and Investment Survey, NSS 77th Round (January-December 2019), Ministry of Statistics and Programme Implementation, Government of India[/caption] It is observed that inter-state disparity is less pronounced in urban areas. Amongst major states, the proportion of individuals owning a deposit account in a bank lies between 80 percent and 90 percent while in rural India high variance is observed. Bank account ownership varies between 94.4 percent (Himachal Pradesh) and 73.8 percent (Gujarat). In Uttarakhand (91.4 percent), Andhra Pradesh (91.2 percent), Rajasthan (90.8 percent), Kerala (90.6 percent), Jammu & Kashmir (90.5 percent), Tamil Nadu (90.5 percent), Chhattisgarh (90.2 percent), Telangana (90.0 percent) and Karnataka (89.7 percent), at least 90 percent rural population held an account. Assam, Bihar and Gujarat are three outlier states with less than 80 percent banking accessibility. Generally, in any aspect of development, urban population is found to be ahead of rural populace. However, this is not the case in access to basic banking facilities. Of 20 major states, in 11 states the proportion of people having deposit accounts in banks was found to be higher in rural areas. For reducing the transaction costs and increasing financial accountability, the government promoted use of electronic money. Debit/credit cards and e-wallets are an important ingredient of this ecosystem. As a part of the digital transformation and localisation of data, the government through the National Payments Corporation of India introduced the RuPay card. On analysing the ownership of debit and credit cards, large rural-urban disparity is observed. In rural areas 28.9 percent people hold debit/credit cards, while it is 52.7 percent in urban India. The gender disparity is also prominent in this aspect in both the rural and urban areas. The male-female gap on this aspect is as high as 21 percentage points in rural areas and 23-percentage points in urban areas (Chart 2). With respect to holding debit/credit cards, a wide inter-state disparity is observed. In rural India, it varies from 60.5 percent in Kerala to 13.2 percent in Uttar Pradesh. For urban India, it is highest for Tamil Nadu (69.7 percent) and lowest for Uttar Pradesh (35.7 percent). After the announcement of demonetisation in November 2016, use of e-wallet was promoted as a means of cashless transactions. NSS 77th round survey observed very low use of e-wallets. It is only 2.4 percent in the rural areas and 14.3 percent in the urban population. In urban areas, e-wallet is extensively used in Telangana (27.5 percent) and lowest in West Bengal (7.1 percent) whereas in rural areas e-wallet is highly used in Himachal Pradesh (6.8 percent) and West Bengal (0.9 percent) lowest. The information provided by NSS 77th round (Situation Assessment of Agriculture Households) bolsters the government’s claim that PMJDY has universalised the access to banking services at the household level. More than 98 percent of agricultural households have a deposit account in the bank. However, the detailed mapping of non-bank individuals (15 percent) is needed. If this were largely coming from deprived sections of society, it would be a matter of concern as with overall high achievement towards banking facilities, they are likely to suffer with high relative deprivation. Despite the success of PMJDY, the use of plastic money and electronic payments has lagged. This lag can be attributed to low levels of achievement across gender and social disparities, raising vital issues of digital divide and digital hesitancy. The writers are assistant professors at Sardar Patel Institute of Economic and Social Research, Ahmedabad. Views expressed are personal.