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Signs of revival: Deposits in Jan Dhan accounts exceed pre-Covid lockdown level

The Jan Dhan accounts — originally intended to spur financial inclusion by making banking facility available to the poor — were used by the government to swiftly transfer funds for immediate relief.The Jan Dhan accounts — originally intended to spur financial inclusion by making banking facility available to the poor — were used by the government to swiftly transfer funds for immediate relief.The Jan Dhan accounts — originally intended to spur financial inclusion by making banking facility available to the poor — were used by the government to swiftly transfer funds for immediate relief.The Jan Dhan accounts — originally intended to spur financial inclusion by making banking facility available to the poor — were used by the government to swiftly transfer funds for immediate relief.

Deposits in the no-frills Jan Dhan accounts have exceeded the pre-lockdown level by a decent margin week after week. This lends some credence to the notion that concerns about wide-spread rural distress during the pandemic may have been exaggerated.

As of August 5, as many as 40.21 crore Jan Dhan accounts had a total balance of Rs 1,29,720 crore, higher than that of Rs 1,18,434 crore on March 25, when the Covid-induced lockdown was imposed or Rs 1,18,106 crore a week before that, official data show. Of course, the net deposits have been easing, albeit at a slow pace, since hitting a peak of Rs 1,35,978 crore on June 10, by when the transfer of the last instalment of the government assistance was almost over.

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Two factors have obviously contributed to the rise.

First, as part of a relief package to cope with the Covid impact, finance minister Nirmala Sitharaman had announced the transfer of Rs 500 a month to 20.4 crore women Jan Dhan account holders for three months starting April. Secondly, banks have opened 1.9 crore more accounts since the lockdown was imposed. However, despite accounting for these factors, the net balance still remains higher than expected.

In an interview to FE in early May, chief economic advisor Krishnamurthy V Subramanian had refuted the notion of a large-scale distress, citing a rise in Jan Dhan deposits from the pre-lockdown level, although he acknowledged that businesses and workers were facing serious challenges due to the pandemic.

While conceding that rural distress is not as widespread as is touted to be in some quarters, some analysts, however, caution against euphoria over the Jan Dhan balance. The net deposits, they say, may also have been influenced by at least two factors — discretionary spending has been hit, leading to low withdrawal of money from the banks; the harvesting of the rabi crops from April has boosted farmers’ earnings.

The Jan Dhan accounts — originally intended to spur financial inclusion by making banking facility available to the poor — were used by the government to swiftly transfer funds for immediate relief.

The opening of Jan Dhan accounts acquired phenomenal speed after Prime Minister Narendra Modi had launched the scheme in August 2014, with millions of accounts being added every month. The pace, however, started slowing since late 2015, as most of the intended beneficiaries were already covered. According to official data, the government’s target of opening one account per household was achieved by as early as January 26, 2015, barring a few areas in Jammu & Kashmir and naxalism-affected districts.

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