Jan-Dhan accounts: A new option for state-owned banks to mobilise deposits

Following this, many banks are exploring previously untapped areas to mobilise deposits while choosing not to engage in an interest rate war

State-owned banks are increasingly targeting JanDhan accounts to mobilise deposits as they face growing pressure to mop up deposits to manage credit growth amid an increasing shift of household savings towards higher-yielding financial instruments.

These accounts are primarily being used for distributing government schemes.

Both the Reserve Bank of India (RBI) and Finance Ministry have expressed concerns on numerous occasions over the sluggish pace of deposit growth compared to credit growth. This may lead to asset-liability management problems for banks. Additionally, they have instructed banks to employ innovative methods to accrue deposits. Following this, many banks are exploring previously untapped areas to mobilise deposits while choosing not to engage in interest rate war.

According to the latest RBI data, while credit growth stood at 15 per cent in the fortnight ended August 23, deposit growth was at 11.3 per cent. The figures exclude the impact of the merger between HDFC Ltd and HDFC Bank.

State Bank of India (SBI), country’s largest lender, is focusing on various segments, including JanDhan account holders, trusts, societies, and the segment below the affluent class but above the normal account holders to boost its deposit base.

At a recent event, SBI managing director (MD) Ashwini Tewari detailed how SBI is targeting low-value segments within JanDhan accounts to mobilise deposits.

Tewari said, “There are a lot of deposits sitting there,” and added that it is now employing bank correspondents to encourage deposits from these accounts.

“Have we actually asked them to deposit? We possibly have not. We can reach out to them and offer small incentives such as insurance and mutual funds,” he added.

K Satyanarayana Raju, MD & chief executive officer (CEO), Canara Bank, said now work for JanDhan accounts and similar schemes have been made a “key result area” for the bank’s staff.

“This leads to more involvement in the work and has helped increase amounts kept in JanDhan accounts,” he said. Raju added that the bank is targeting deposits to the tune of Rs 14,000 crore in such accounts by the end of FY25.

Currently, deposits in such accounts maintained with the bank stood at Rs 11,000 crore.

“Now, our focus is to do cross selling of services and products to JanDhan account holders. This will help us get higher balances and bring stickiness in the deposits,” Raju added.

Further, according to a senior Bank of Maharashtra official, the Pune-based lender is analysing various pincodes across the country and establishing customer service points and outlets for JanDhan account holders, along with clusters of related services.

“This has helped increase JanDhan deposits and also cross sell other services to such account holders, and bring viability,” he said.

The JanDhan scheme of the central government was aimed at providing access to the banking system for unbanked segments through basic savings bank deposit accounts. 

Under the scheme, one basic savings bank account is opened for an unbanked person, where there is no requirement to maintain any minimum balance. The bank pays interest on deposits in such accounts and also issues a RuPay debit card.

Additionally, an accident insurance of Rs 2 lakh is available with the RuPay cards and an overdraft facility of Rs 10,000 is made available for eligible account holders.

So far, over half a billion – 533.7 million – accounts have been opened, of which 411.6 million are with public sector banks.

Around 16.5 million are with private sector banks, 99.3 million with regional rural banks, and the rest with rural cooperative banks.

Latest data suggests that cumulatively, deposits in these over half a billion accounts under the JanDhan scheme stand at Rs 2.28 trillion as of September 4, 2024. Additionally, over 360 million RuPay debit cards have also been issued to these accounts.