👨🏼‍🍼Financial Inclusion - PMJDY, MUDRA & NAFIS Survey

Why Financial Inclusion Matters for Farmers

Consider a marginal farmer in Bundelkhand who needs Rs 20,000 for rabi sowing. Without a bank account, his only option is the village moneylender charging 5% per month (60% per year). By the time he sells his wheat, half his income goes to interest. If this farmer had a bank account and access to a Kisan Credit Card at 4-7% annual interest, he would save thousands of rupees. This is why financial inclusion is not just a banking concept — it is a matter of farmer survival.

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What is Financial Inclusion?

[!IMPORTANT] Rangarajan Committee (2008) defined financial inclusion as: “The process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups at an affordable cost.”

Financial inclusion means ensuring that every person — especially the poor, rural, and marginalized — has access to:

Financial Service	Why It Matters for Farmers
Bank accounts	Safe place to save; receive government subsidies via DBT
Low-cost credit	Affordable loans for seeds, fertilizers, equipment
Insurance	Protection against crop failure, death, accidents
Pension	Old-age security when farming income stops
Financial advisory	Guidance on savings, investment, and loan management

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Why is Financial Inclusion Necessary?

1. Broadens the resource base — when rural households save in banks instead of keeping cash at home or buying gold, these savings become available for productive lending, creating a virtuous cycle of growth
2. Protects against emergencies — access to formal savings and credit prevents families from falling into debt traps during crop failures, medical crises, or natural disasters
3. Reduces exploitation — informal moneylenders charge 36-120% interest per annum vs 4-12% by banks; formal banking access breaks the cycle of perpetual debt

[!TIP] Exam Tip: Financial inclusion has three benefits — broadens resource base, protects in emergencies, reduces exploitation by moneylenders.

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NABARD All India Financial Inclusion Survey (NAFIS)

The NAFIS survey by NABARD is one of the most comprehensive studies of rural household finances in India. Key facts are frequently asked in exams.

Survey Overview

Parameter	Detail
Conducted by	NABARD
Reference year	2015-16
Households covered	40,327 rural households
Villages	2,016 villages in 245 districts across 29 states
Population covered	1,87,518
Data collection	Paperless — Computer Aided Personal Interview (CAPI)
Commissioned	2016

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Key Income Findings

Parameter	Agricultural Households	Non-Agricultural Households	All Rural Households
Average annual income	Rs 1,07,172	Rs 87,228	Rs 96,708
Income advantage	23% higher than non-agricultural	—	—

[!NOTE] Agricultural households earn 23% more than non-agricultural households. Farm households = those with >Rs 5,000 value of produce from agricultural operations.

Income Sources of Agricultural Households:

Source	Share
Cultivation	34%
Wages	34%
Salaries	16%
Livestock	8%
Non-farm sector	6%
Others	2%

Key fact: 48% of rural families are agricultural households — slightly less than half of all rural households are directly engaged in farming.

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Debt, Savings & Insurance Findings

Parameter	Agricultural Households	Non-Agricultural Households	All Rural
Incidence of Indebtedness (IOI)	52.5%	42.8%	47.4%
Average Outstanding Debt (indebted)	Rs 1,04,602	Rs 76,731	Rs 91,407
Bank account ownership	55%	—	88.1%
Average savings per annum	—	—	Rs 17,488
Insurance coverage	26%	25%	—
Pension coverage	20.1%	18.9%	—

[!TIP] Exam Fact: Higher IOI among agricultural households (52.5% vs 42.8%) reflects the capital-intensive nature of farming. Bank account ownership at 88% but only 26% insurance coverage shows that account opening alone is not enough — financial literacy and services must follow.

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Pradhan Mantri Mudra Yojana (PMMY)

[!IMPORTANT] PMMY launched on 8th April, 2015 to “fund the unfunded”. MUDRA is a refinancing institution (subsidiary of SIDBI) — it does NOT lend directly to borrowers.

What is MUDRA?

A rural woman in Bihar runs a small pickle-making business from home. She needs Rs 30,000 for glass jars, raw materials, and a sealing machine. No bank would give her a loan — she has no collateral, no formal business registration. PMMY was designed precisely for entrepreneurs like her.

• Full form: Micro Units Development and Refinance Agency
• Purpose: Fund non-corporate, non-farm small/micro enterprises that were invisible to the formal banking system
• Activities covered: Manufacturing, Services, Retail, and Agriculture Allied Activities
• Loan limit: Up to Rs 10 lakh for non-farm income generating activities
• Lending model: MUDRA is a refinancing institution — it provides funds to banks and lending institutions at lower rates, which in turn lend to end borrowers (similar to how NABARD refinances agricultural loans)
• Parent body: Wholly owned subsidiary of SIDBI (Small Industries Development Bank of India)
• Online application: Available on Udyamimitra portal (www.udyamimitra.in)

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MUDRA Loan Categories

Category	Loan Amount	Stage Symbolized	Target
Shishu (Child)	Up to Rs 50,000	Inception/startup phase	At least 60% of total credit must flow here
Kishor (Adolescent)	Rs 50,000 to Rs 5 lakh	Growth phase	Balance shared with Tarun
Tarun (Young Adult)	Rs 5 lakh to Rs 10 lakh	Maturity/expansion phase	Balance shared with Kishor

[!TIP] Mnemonic — “SKT”: Shishu (smallest, 60% priority) —> Kishor (middle) —> Tarun (largest). Think: a business grows from child to youth.

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Where to Get MUDRA Loans

Borrowers can approach any of these institutions:

• Public Sector Commercial Banks
• Regional Rural Banks (RRBs)
• Small Finance Banks (SFBs)
• Micro Finance Institutions (MFIs)
• Non-Banking Finance Companies (NBFCs)

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Eligibility

• Any Indian citizen with a business plan for non-farm income generating activity
• Credit need must be less than Rs 10 lakh
• Budget 2019-20 special provision: Every verified women SHG member with a Jan-Dhan account gets Rs 5,000 overdraft; one woman per SHG eligible for loan up to Rs 1 lakh under MUDRA

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Borrower-Friendly Features

Feature	Detail
Processing fees	None
Collateral	Not required
Repayment period	Up to 5 years
Subsidy	No subsidy under PMMY, but if linked to a Government scheme providing capital subsidy, that subsidy applies
Default condition	Applicant must not be a defaulter of any bank/financial institution

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Implementation Structure

• Government proposes to set up MUDRA Bank through statutory enactment
• MUDRA Bank regulates and refinances all MFIs lending to micro/small business entities
• Partners with state/regional coordinators to provide finance to Last Mile Financers (local cooperative banks, NBFCs, MFIs at grassroots level)

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Pradhan Mantri Jan Dhan Yojana (PMJDY)

[!IMPORTANT] PMJDY announced on 15th August, 2014 as a National Mission on Financial Inclusion. It is the world’s largest financial inclusion programme with approximately 40 crore accounts opened.

The Problem PMJDY Solved

Before PMJDY, millions of rural households — including farming families — had no bank accounts. Government subsidies meant for farmers were siphoned off by intermediaries. A farmer entitled to Rs 6,000 under PM-KISAN would never receive it without a bank account. PMJDY created the infrastructure for Direct Benefit Transfer (DBT), the JAM trinity (Jan Dhan-Aadhaar-Mobile), and digital payments in rural India.

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Objectives

1. Bring financially excluded poor into the banking system
2. Cover both urban and rural areas
3. Reduce corruption in government subsidies through DBT
4. Support Digital India — PMJDY accounts form the foundation of digital payments
5. Strengthen the Indian economy through greater financial participation

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Salient Features

Feature	Detail
Account type	Basic Saving Deposit Bank Account (BSBD) — zero balance, no minimum balance
Overdraft facility	Rs 10,000 for Aadhaar-linked accounts (after 6 months of satisfactory operation)
Debit card	RuPay card (India’s indigenous card network by NPCI)
Accident insurance	Rs 1 lakh personal accident cover (HDFC Ergo)
Life cover	Rs 30,000 (LIC)
Business correspondents	Minimum Rs 5,000 monthly remuneration to BCs providing last-mile banking

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Phased Implementation

Phase	Period	Focus
Phase I	15 Aug 2014 - 14 Aug 2015	Universal banking access within 5 km; one BSBD account per household with RuPay card; financial literacy at village level; DBT expansion; KCC issuance
Phase II	15 Aug 2015 - 14 Aug 2018	Micro-insurance; unorganized sector pension (Swavalamban) through BCs
Phase III	Beyond 14 Aug 2018	Shift from “Every Household” to “Every Adult”; enhanced benefits

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Phase III Enhancements

Feature	Before Phase III	After Phase III
Coverage target	Every household	Every adult
Overdraft limit	Rs 5,000	Rs 10,000
Unconditional overdraft	None	Up to Rs 2,000 (no conditions)
OD age limit	18-60 years	18-65 years
Accidental insurance (new accounts after 28.8.18)	Rs 1 lakh	Rs 2 lakh

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Achievements

Metric	Achievement
Total accounts	Approximately 40 crore (as of Nov 2019)
Total deposits	Over Rs 1.30 lakh crore
Women account holders	53% of all Jan Dhan accounts
Rural/semi-urban accounts	59% of all Jan Dhan accounts

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Impact

• Created infrastructure for DBT — saved the government over Rs 2.2 lakh crore by eliminating fake and duplicate beneficiaries
• During COVID-19, under Pradhan Mantri Garib Kalyan Yojana, Rs 1,500 per account was remitted in three equal monthly installments to 20 crore women Jan Dhan account holders within days of the lockdown announcement
• Demonstrated that PMJDY is not just about opening accounts — it is about building a delivery infrastructure for welfare

[!TIP] Exam Quick Recall for PMJDY: Date = 15 Aug 2014 | Accounts = 40 crore | Women = 53% | Rural = 59% | OD = Rs 10,000 | RuPay insurance = Rs 2 lakh (post-2018) | Life cover = Rs 30,000

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Summary Table

Topic	Key Facts
Financial Inclusion definition	Rangarajan Committee (2008) — access to financial services at affordable cost for vulnerable groups
NAFIS Survey	NABARD; 2015-16; 40,327 households; Agri income Rs 1,07,172 vs Non-agri Rs 87,228
Farm vs Non-farm income	Agricultural households earn 23% more
Rural IOI	47.4% overall; 52.5% for agricultural households
PMMY/MUDRA	8 April 2015; “Fund the unfunded”; subsidiary of SIDBI; refinancing institution
MUDRA categories	Shishu (up to 50K, 60% priority), Kishor (50K-5L), Tarun (5L-10L)
MUDRA features	No processing fee, no collateral, up to 5 years repayment
PMJDY	15 Aug 2014; world’s largest financial inclusion; ~40 crore accounts
PMJDY features	BSBD account, RuPay card, Rs 10K OD, Rs 2L accident cover, Rs 30K life cover
PMJDY Phase III	Every adult (not just household); Rs 2,000 unconditional OD; age 18-65
COVID relief via PMJDY	Rs 1,500 x 3 months to 20 crore women account holders