60% rise in new Jan Dhan accounts since COVID-19 outbreak; deposits surge to over Rs 11,000 crore

The COVID-19 pandemic has led to a 60 per cent increase in the opening of new Jan Dhan accounts, the latest SBI Ecowrap report says. Besides Jan Dhan accounts, labour remittances also jumped smartly in September, indicating the return of labourers after reverse migration. The remittances were accompanied by greater creation of first-time payroll jobs in August, the report indicates. It also notes that to counter the impact of COVID-19, the Centre should work towards putting more money into the hands of the poor as a sort of third fiscal stimulus.

The data suggests the average balance of PMJDY accounts in April stood at Rs 3,400 in April. It declined to Rs 3,168 in September but marginally increased to Rs 3,185 in October. The total number of PMJDY accounts as on October 14 stood at 41.05 crore, with a total balance of Rs 1.31 lakh crore. Since April 1, around 3 crore accounts have been opened, with a total rise in deposits of Rs 11,060 crore in the PMJDY accounts.

"Thus, the initial increase in average balance that was primarily due to the loss of livelihood due to pandemic and shift of migrant labourers from urban areas to the home resulting in a jump of precautionary savings, may have been reversed," says the report.

Empirical research suggests that PMJDY accounts work as a primary vehicle for labour remittances, apart from increased lending, smoothing consumption, increased spending on healthcare and most importantly, the usage is more frequent in areas that are more "crime-prone".

The SBI Research, based on labour remittances from September 2019 to September this year, concludes that it seemed migrant labourers were coming back in adequate numbers to workplaces for livelihood and that too much before Diwali as was largely expected.

Additionally, during April-August, 25 lakh new EPF subscribers joined, of which 12.4 lakh were first-time payroll entrants. "The point of concern though is that the degree of formalisation has dropped significantly to 6% in FY21 from an average of 11% in earlier years," it says. The increase in remittances though is in perfect coordination with an increase in payroll. The jump in payroll leads to higher remittances.

Evidence also suggests the usage of PMJDY accounts increased over time in regions that are more prone to theft. The SBI report acknowledged the genesis of crime can also be traced to the interplay of various social, economic, demographic, local and institutional factors, apart from putting more money in accounts at the lower strata of society. "There is evidence of PMJDY accounts having some impact on crimes," the report said.

It also emphasises that the government should strive to put more money into such accounts as a sort of third fiscal stimulus, possibly through enlarging the NREGA scheme or through a scheme for urban poor. "It is a matter of satisfaction that the usage of such PMJDY accounts in current unprecedented times has surely helped in maintaining social harmony," the report states.

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