Test: Indian Financial System - 2 - Banking Exams MCQ

Pradhan Mantri Jan-Dhan Yojana (PMJDY) is a National Mission for Financial Inclusion that was launched on August 28, 2014, to ensure inexpensive access to financial services such as basic savings and deposit accounts, remittance, credit, insurance, and pension.

Mobile Banking: It refers to the use of a mobile device to carry out financial transactions anywhere.

• ​This service is provided by majorly all financial institutions, especially banks.
• Mobile banking enables customers to carry out various transactions, which may vary depending upon institutions.
• Mobile banking service can be categorized into, account information, transaction, investment, support service, content, and news.
• It can be done either through the internet or SMS.
• In 2002 mobile banking was started in India by a way through SMS.

Business correspondents are retail agents engaged by banks for providing banking services at locations other than a bank branch.

Following will have an impact on financial inclusion process:

• Jan Dhan-Aadhar-Mobile (JAM) Trinity:
  • The combination of Aadhaar, PMJDY, and a surge in mobile communication has reshaped the way citizens access government services.
  • As per the estimates in March 2020, the total number of beneficiaries under the Jan Dhan scheme has been more than 380 million.
  • By significantly changing the concept of individual identity, Aadhaar has not only brought about a secure and easily verifiable system but also easy to obtain as well to help in the financial inclusion process.
  • The government has also launched many flagship schemes to promote financial inclusion and provide financial security to empower the poor and unbanked in the country.
  • These include the Pradhan Mantri Mudra Yojana, Stand-Up India Scheme, Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Suraksha Bima Yojana, and Atal Pension Yojana.
• Expansion of financial services in Rural and Semi-Urban Areas:
  • These include the opening of bank branches in remote areas.
  • Issuing Kisan Credit Cards (KCC)
  • Linkage of self-help groups (SHGs) with banks.
  • Increasing the number of automated teller machines (ATMs)
  • Business correspondents model of Banking, etc.
  • Promotion of Digital Payments:
  • With the strengthening of the Unified Payment Interface (UPI) by NPCI, digital payments have been made secure, compared to the past.
  • The Aadhar-enabled payment system (AEPS) enables an Aadhar enabled bank account (AEBA) to be used at any place and at any time, using micro ATMs.
  • The payment system has been made more accessible due to offline transaction-enabling platforms, like Unstructured Supplementary Service Data (USSD), which makes it possible to use mobile banking services without the internet, even on a basic mobile handset.
• Enhancing Financial Literacy:
  • The Reserve Bank of India has undertaken a project titled "Project Financial Literacy". 
  • The Objective of the project is to disseminate information regarding the central bank and general banking concepts to various target groups, including, school and college-going children, women, rural and urban poor, defense personnel, and senior citizens.

The Government of India launched the Stand-Up India scheme on April 5, 2016, as part of efforts to support entrepreneurship among women and Scheduled Caste & Scheduled Tribe (SC & ST) communities.

Pradhan Mantri Jan Dhan Yojna (PMJDY) is a national mission on financial inclusion. The main objective of this scheme is to ensure universal access to banking facilities with at least one basic bank account for every household. PMJDY is the core of the philosophy ‘Sab Ka Sath Sab ka Vikas’. This programme is run by Department of Financial Services under Ministry of Finance, Government of India.

The Reserve Bank of India has launched "Project Financial Literacy" to spread information about the central bank and general banking principles to a variety of target groups, including school and college students, women, the rural and urban poor, defense personnel, and older residents.

Objectives of Financial Inclusion:

• Financial inclusion intends to help people secure financial services and products at economical prices such as deposits, fund transfer services, loans, insurance, payment services, etc.
• It aims to establish proper financial institutions to cater to the needs of poor people. These institutions should have clear-cut regulations and should maintain high standards that are existent in the financial industry.
• Financial inclusion aims to build and maintain financial sustainability so that the less fortunate people have the certainty of funds that they struggle to have.
• Financial inclusion also intends to have numerous institutions that offer affordable financial assistance so that there is sufficient competition so that clients have a lot of options to choose from. There are traditional banking options in the market. However, the number of institutions that offer inexpensive financial products and services is very minimal.
• Financial inclusion intends to increase awareness about the benefits of financial services among the economically underprivileged sections of society.
• The process of financial inclusion works towards creating financial products that are suitable for the less fortunate people of the society.
• Financial inclusion intends to improve financial literacy and financial awareness in the nation.
• Financial inclusion aims to bring in digital financial solutions for the economically underprivileged people of the nation.
• It also intends to bring in mobile banking or financial services in order to reach the poorest people living in extremely remote areas of the country.
• It aims to provide tailor-made and custom-made financial solutions to poor people as per their individual financial conditions, household needs, preferences, and income levels.

Individuals who are Indian citizens are eligible to open this PMJDY account. Even minors above the age of 10 can open an account under this arrangement. Nonetheless, guardians are in charge of children's accounts. Minors are eligible for a RuPay Card, which may be used to make four monthly withdrawals.

In the Indian context, the term ‘financial inclusion’ was used for the first time in April 2005 in the Annual Policy Statement presented by Y.Venugopal Reddy, the then Governor, Reserve Bank of India. While recognizing the concerns in regard to the banking practices that tend to exclude rather than attract vast sections of population, banks were urged to review their existing practices to align them with the objective of financial inclusion.