Editorial Notes

[Editorial Notes] Thinking beyond the Jan Dhan Yojana

As many Jan Dhan Yojana accounts are non-operational now, there should be a reality check if the monetary benefit is being percolated to the person in real need.
By IASToppers
May 13, 2020


  • Introduction
  • Ingredients of JAM
  • An illusion and its fading
  • Unclear status of JDY accounts
  • Exclusion errors
  • Inclusion errors
  • Unreliability of JDY payments
  • Back to cash in hand?
  • Conclusion


Thinking beyond the Jan Dhan Yojana

For IASToppers’ Editorial Simplified Archive, click here


Jan Dhan-Aadhaar-Mobile (JAM) trinity is the initiative by Government of India to link Jan Dhan accounts, Mobile numbers and Aadhar cards of Indians to directly transfer subsidies to intended beneficiaries and eliminate intermediaries and leakages. The JAM trinity was first proposed in the Economic Survey 2014-15. The initiative needs to be evaluated now that it has been able to achieve its set target or not.

Ingredients of JAM:

1. Government → Beneficiary: the challenge of identification:

  • To identify beneficiaries, the government needed databases of eligible individuals.
  • In this direction, the step of creating Aadhar cards for all the individuals was initiated.

2. Government → Bank: the challenge of payment:

  • After identifying beneficiaries, the government had to transfer money to them.
  • For that every beneficiary needs a bank account and the government needs their account numbers.
  • This constraint was significantly eased by the Pradhan Mantri Jan Dhan Yojana opening zero balance accounts.

3. Bank → Beneficiary: the last-mile challenge of getting money into people’s hands

  • To get the money into people’s hands, greater use of mobile payments technology is to be done.
  • Mobiles can not only transfer money quickly and securely, but also improve the quality and convenience of service delivery.

An illusion and its fading:

  • With all the utopia built around the JAM, it took the coronavirus crisis to burst the bubble.
  • In the early days of the crisis, JAM was often invoked as a possible tool of emergency relief. But when the time actually came to make cash transfers to the poor, JAM turned out to be of little use.
  • Poor people, far from using the “thumb in thirty seconds” method to cash in, were still running from pillar to post to collect their meagre benefits from old-fashioned bank accounts and have little to do with JAM.
  • Sure enough, long bank queues and related hardships have started emerging, especially in rural areas where the density of banks is relatively low.
  • In a Dalberg survey conducted last month in 10 states, only 25% of poor households reported that it was “easy” to access cash benefits.
  • One way to think about this is to compare women’s JDY accounts with another possible basis for cash transfers, at least in rural areas: the list of households that have a National Rural Employment Guarantee Act (NREGA) job card.
  • The numbers of accounts are roughly comparable: about 14 crore for NREGA job cards, and 12 crore or so for women’s JDY accounts in rural and semi-urban areas (assuming that the gender distribution of accounts is similar in rural and urban areas).

Unclear status of JDY accounts:

  • The JDY accounts are a mighty mess – the NREGA job-cards list is far more transparent and well-organised.
  • During the frantic initial JDY wave, in 2014-15, banks opened JDY accounts in mass numbers to meet the targets.
  • Banking norms went for a toss: many accounts were opened without informed consent, duplicate accounts flourished, Aadhaar numbers were seeded without any safeguards, and so on.
  • Later on, a large proportion of JDY accounts (40% in March 2017, down to 19% in January 2020) went “dormant” as customers were unable or unwilling to use them.
  • Other accounts were blocked because the account holders were unable to complete timely ex-post biometric authentication (“e-KYC”) of the Aadhaar numbers that had been seeded into their accounts.
  • It is not clear what proportion of JDY accounts are operational today, in the sense that a bank transfer to these accounts will actually reach the recipient in good time.

Exclusion errors:

  • The cash transfers to women’s JDY accounts are likely to involve large exclusion errors.
  • According to a recent Yale study, less than half of poor adult women have a JDY account (an even lower proportion, 21%, know that they have a JDY account).
  • Consistent with this, the Dalberg study mentioned earlier finds that the proportion of poor households where at least one adult woman has a JDY account is just 57%.
  • The NREGA job-card list is likely to have much better coverage of poor households.
  • The natural complementarity between NREGA and social security pensions (covering more than four crore persons under the National Social Assistance Programme alone) would further help to reduce exclusion errors.

Inclusion errors:

  • The inclusion errors are also likely to be larger in the JDY approach.
  • Job cards are meant for rural workers, JDY accounts are for everyone.
  • National Election Studies 2019 data show that JDY beneficiaries tend to be better-off than NREGA beneficiaries.
  • Another survey suggests that the probability of having a JDY account is more or less the same for poor and non-poor households.

Unreliability of JDY payments:

  • There have been significant issues (e.g. delayed, rejected, blocked or diverted payments) with NREGA payments, often related to Aadhaar.
  • But then, numerous “direct benefit transfer” schemes (social security pensions, scholarships, maternity benefits, among others) have faced similar problems, also reflected in official transaction data.
  • Both the Aadhaar Payment Bridge System (APBS) and the Aadhaar-enabled Payment system (AePS) are shot through with technical glitches, possibly exacerbated by the recent surge in transactions, and especially unkind to the powerless.
  • Transfers to women’s JDY accounts are unlikely to be more reliable than transfers to job-card holders.

Back to cash in hand?

  • In fact, as far as effective payment is concerned, there is a further argument in favour of the NREGA job-cards list: unlike JDY accounts, it lends itself to the “cash-in-hand” method (on-the-spot payment in cash, instead of bank payments) as a possible fallback.
  • The reason is that the job-cards list is a transparent, recursive household list with village and gram panchayat identifiers, while the list of JDY accounts is an opaque list of individual bank accounts.
  • Cash-in-hand may seem like the antithesis of JAM, but this option may become important in the near future if the banking system comes under further stress.
  • There are precedents of effective use of the cash-in-hand method, notably in Odisha for pension payments, and in various states for NREGA wage payments.
  • Several states (including Andhra Pradesh, Odisha and Tamil Nadu) have already resorted to cash-in-hand for relief payments during the lockdown.


The government should consider some other options too for cash relief to the population, including a switch to the NREGA job-cards list in rural areas. As many JDY accounts are non-operational now, there should be a reality check if the benefit is being percolated to the person in real need. The government should look for options which are more inclusive and can be accessed by all.

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