Sheri is an invited Panelist at the XIII International Conference on Public Policy and Management – Inclusion and Exclusion: Policy and Practice, India Habitat Centre, New Delhi (23-25 August 2018)


Financial Inclusion In India: Supply Side Incentives, Demand Side Barriers, Social Security and Credit Policy Effectiveness  


Many sources, including the extensive 2017 survey of the Melinda and Bill Gates Foundation, attest to the success of the PMJDY drive since 2014 to include about 80% of Indian households with a basic bank account.  However, these same surveys find that though the number of newly registered bank account holders have soared, about on average 45% (see pages 29 and 31 of M&B Gates Survey), across all categories of the PMJDY accounts, are not used actively.   The factors that were a barrier to a lack of financial inclusion and the absence of a bank account in the pre PMJDY period remain barriers for the active use of PMJDY accounts.  These factors include poverty,  illiteracy, female gender issues, which are all exacerbated in a rural setting.  Clearly, being a  registered bank account holder is  the first step on the path to FI.  We use the cross sectional bank level data since the inception of PMJDY to quantify the incentives and costs involved in targeting households in SSAs in rural and other settings.  We construct two indexes – one for the efficacy of supply side bank targets and one for account effectiveness.  The latter include factors such as size of bank balance, number of times used , availing of credit.  Using per PMJDY beneficiary bank balance data we identify banks whose credit creation is enhanced by their participation in PMJDY  and those that are effectively subsidizing the ineffective PMJDY accounts.  While it is noted that insufficient income of PMJDY account holders is the prime driver for zero bank balances, we conclude that the tie up of  PMJDY accounts with Aadhar cards and with social security payments will bring about the efficiencies that can overcome problems of subprime banking policies.


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