Are Jan Dhan Yojana Accounts Repository of Black Money?

News reports indicate that there is a sudden surge of deposits in Pradhan Mantri Jan Dhan Yojana accounts following demonetisation of Indian currency announced on November 8. The deposits since have soared by around Rs. 27,198 crore in 14 days.

The Pradhan Mantri Jan Dhan Yojana (PMJDY) was launched on August 28, 2014 for promoting financial inclusion by providing banking services to the disadvantaged segments of society and with the objective of ensuring at least one bank account for every household.

As on 23 November 2016, total balance in 25.68 crore Jan Dhan bank accounts was Rs. 72,834.72 crore, as against the total balance of Rs 64,252.15 crore on 9 November. Out of 25.68 crore accounts 22.94 per cent are zero balance accounts, though the number of zero balance accounts have slightly declined.

However, the government and RBI have been alerting Jan Dhan account holders not to misuse their accounts by allowing black money hoarders to deposit the scrapped bank notes into their accounts, or allowing conversion of black money.

There are also reports that the Income Tax department is looking into the sudden surge in deposits, though the final data on the deposits will be available only after December 31. However, as the RBI has asked banks to send comprehensive reports, including denomination-wise deposits, these account holders need to be cautious and not misuse their accounts.

Also, there are various reports showing that unscrupulous hoarders of currency notes, hawala operators and even some business men using the Jan Dhan accounts, paying even a commission to the account owners.

The problem with many account holders is that many of them are either poorly educated or illiterate. They simply do not understand the implications of illegal currency conversion. For a poor person, money is only money and he or she cannot differentiate between black and white money.

What makes situation serious for these account holders is that the accounts were almost dormant for quite a long time and all of a sudden, when high value currency could not be exchanged elsewhere, most of them went and deposited the money accumulated with them in their bank accounts. Within limits, they are safe, but exceptionally bulged accounts may not stand the scrutiny of the tax sleuths.

And it is quite normal for rural India to keep whatever savings they have at their own houses. Even money for the marriage of girls are saved and accumulated in cash. Several people buy and sell land and other high value items using cash. That is the kind of economy in rural India. So, these people can be easily exploited by money lenders, cash hoarders, blade companies and other illegal operators.