Pradhan Mantri Jan Dhan Yojana – A Zero-Balance Savings Account


The nationalization of banks happened in 1969 in India, followed by another wave in 1980. As a result, the top 20 private banks were nationalized. Together with the State Bank of India and its seven associates, these banks were supposed to provide banking facilities to the entire Indian population. However, though the banks did a commendable job of bringing the government schemes to every Indian citizen, they could not achieve the objective of 100% banking inclusion, where every Indian should have at least one bank account. Therefore, the Pradhan Mantri Jan Dhan Yojana was launched in August 2014 to ensure 100% banking inclusion and provide access to banking services to all sections of our society.

Earn 3 To 4 Times More Interest Than Bank Fixed Deposits 

What is Pradhan Mantri Jan Dhan Yojana?

The Pradhan Mantri Jan Dhan Yojana aka PMJDY is a zero-balance savings account opened in a nationalized bank with facilities like accidental insurance cover and overdraft facility.


Eligibility to open a PMJDY account

Indian citizens above ten years of age and not having an existing bank account are eligible to open a PMJDY account. Individuals wishing to open the PMJDY account must submit any of the below documents to satisfy KYC requirements.

  1. Passport
  2. Aadhar Card
  3. PAN Card
  4. NREGA Job Card
  5. Driving License
  6. Voter’s ID Card
  7. ID cards issued by statutory and regulatory authorities
  8. One photograph along with an attested letter from a Gazetted Officer

The interest rate is the same that the bank offers to other savings accounts. Hence, it can vary from one bank to the other.

Benefits of the PMJDY Account

  • There is no necessity to maintain any minimum balance in this account. However, if customers wish to use a checkbook, they have to.
  • Account-holders maintaining a good record are offered an overdraft facility after six months.
  • Individuals are eligible for an accidental insurance cover of Rs 1 lakh. It has been increased to Rs 2 lakhs for accounts opened after August 28, 2018.
  • The account holders can link their PMJDY accounts to receive the Direct Benefit Transfer amounts from various sources.
  • An overdraft facility of Rs 5000 is available to the lady member in the house.
  • The account holders benefit from mobile banking to check their account balances.

Banks offering the PMJDY facility.

All the PSU banks and select private sector banks offer this facility. As a result, these banks have opened nearly 30 crore PMJDY accounts until December 2021.

How does the PMJDY compare with chit funds?

Chit funds have an illustrious history of functioning in India even before the concept of banking came into existence. However, the chit funds in those times were limited to specific groups of homogenous people. So, let us see how chit funds work. 

A group of people used to come together and decide to participate in a chit fund. Usually, there were around 20 people. Hence, it got the name Beesi. These 20 people had to deposit a fixed pre-decided sum of money every month towards the group savings pool.

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The amount collected in the pool used to go to any one of the following,

  1. The winning member by draw of lots
  2. The member in need of the funds
  3. The member willing to make the highest sacrifice

The balance amount used to be shared in equal proportion by the other members. The scheme was such that every member got a chance once to take home the group savings pooled money. Hence, it was a variant of the rotating savings and credit association (ROSCA) account. The Money Club app follows a similar concept.

The modern-day chit funds work on the same ROSCA principle with minor adjustments. Today, you have online chit funds where one member does not know the other. But, the chit fund manager manages the show properly. These chit funds are registered with the respective regulatory authorities, who regularly monitor the fund’s activities.

Similarities between ROSCA and PMJDY

The only similarity between ROSCA and PMJDY is that both these avenues offer savings opportunities to people. However, since they work on different principles, there cannot be any comparison between them.

How much to save from salary every month towards ROSCA and PMJDY?

It depends on the individual. The PMJDY is a regular savings account, whereas the ROSCA is a savings-cum-credit facility. The returns on ROSCA are considerably higher than the PMJDY account. So, you can use the PMJDY as a regular savings account and save money using ROSCA to get better returns. We recommend that you earmark 10% of your salary towards reliable chit fund operations such as those operated by Money Club.

It can help your money grow while ensuring your investment’s safety.