JAM Trinity is one of the flagship policy of the government. In times of COVID crisis, this article highlights some limits of JAM trinity. Issues of inclusion error, exclusion error and even problem of transparency with JAM accounts are discussed. The NREGA cards instead of Jan Dhan account is suggested as the better option. Why is it so? Read to know more…

High hopes from JAM

• The original formulation, in 2015, mentioned two possible forms of the JAM trinity: mobile banking and post office payments.
• The second option never made much progress.
• So, Aadhaar-enabled mobile banking became the supreme goal.
• In January 2017, NITI Aayog CEO Amitabh Kant predicted the imminent demise of all cash-transfer paraphernalia other than mobiles.
• These hopes reached new heights as the JAM project latched on to another flourishing narrative, universal basic income (UBI).
• If you want to make cash transfers to everyone, what better platform can you have than Aadhaar, India’s unique biometric ID, doubling up as a permanent financial address?

Corona crisis belied the hopes from JAM

• In the early days of the crisis, JAM was often invoked sometimes along with UBI as a possible tool of emergency relief.
• But when the time actually came to make cash transfers to the poor, JAM turned out to be of little use.
• The JAM had not gone beyond some fancy digital-payment systems for the privileged.
• Poor people were still running from pillar to post to collect their meagre benefits from old-fashioned bank accounts.
• Some also use the services of “business correspondents”, but those have little to do with JAM.
• Sure enough, long bank queues and related hardships started to emerge, especially in rural areas where the density of banks is relatively low.
• In a Dalberg survey conducted last month in 10 states, only 25% of poor households reported that it was “easy” to access cash benefits.

NREGA job Cards: A better option than Jan Dhan Account

• The lead cash-relief measure in the national relief package consists of monthly transfers of ₹500 to women’s JDY accounts.
• But is that a good idea?
• Let’s compare women’s JDY accounts with another possible basis for cash transfers, at least in rural areas: the list of households that have a National Rural Employment Guarantee Act (NREGA) job card.
• The numbers of accounts are roughly comparable: about 14 crore for NREGA job cards, and 12 crore or so for women’s JDY accounts in rural and semi-urban.

JDY approach fares poorly on the following 3 counts

1. Lack of transparency and clarity

• JDY accounts are a mighty mess – the NREGA job-cards list is far more transparent and well-organised. 
• During the frantic initial JDY wave, in 2014-15, banks opened JDY accounts en masse to meet the targets. Banking norms were not followed always.
• Later on, a large proportion of JDY accounts – 40% in March 2017, down to 19% in January 2020– went “dormant” as customers were unable or unwilling to use them.

2. Large exclusion error

• The cash transfers to women’s JDY accounts are likely to involve large exclusion errors.
• According to a recent Yale study, less than half of poor adult women have a JDY account, an even lower proportion, 21%, know that they have a JDY account.
• The NREGA job-card list is likely to have much better coverage of poor households.
• The natural complementarity between NREGA and social security pensions covering more than four crore persons under the National Social Assistance Programme alone would further help to reduce exclusion errors.

3. Large inclusion error

• Inclusion errors are also likely to be larger in the JDY approach.
• Job cards are meant for rural workers, JDY accounts are for everyone.
• National Election Studies 2019 data show that JDY beneficiaries tend to be better-off than NREGA beneficiaries. ( and still, they would get benefits i.e. inclusion error)
• Earlier survey data suggest that the probability of having a JDY account is more or less the same for poor and non-poor households.

Comparison on reliability basis

• There have been significant issues e.g. delayed, rejected, blocked or diverted payments with NREGA payments, often related to Aadhaar.
• But then, numerous “direct benefit transfer” schemes –social security pensions, scholarships, maternity benefits, among others have faced similar problems, also reflected in official transaction data.

• Both the Aadhaar Payment Bridge System(APBS) and the Aadhaar-enabled Payment System (AePS) are shot through with technical glitches.
• Transfers to women’s JDY accounts are unlikely to be more reliable than transfers to job-card holders.

Cash in hand option

• As far as effective payment is concerned, there is a further argument in favour of the NREGA job-cards list.
• Unlike JDY accounts, it lends itself to the “cash-in-hand” method on-the-spot payment in cash, instead of bank payments as a possible fallback.
• The reason is that the job-cards list is a transparent, recursive household list with village and gram panchayat identifiers, while the list of JDY accounts is an opaque list of individual bank accounts.
• Cash-in-hand may seem like the antithesis of JAM, but this option may become important in the near future if the banking system comes under further stress.
• There are precedents of effective use of the cash-in-hand method, notably in Odisha for pension payments, and in various states for NREGA wage payments.
• Several states including Andhra Pradesh, Odisha and Tamil Nadu have already resorted to cash-in-hand for relief payments during the lockdown.

Consider the question, ” The need for financial inclusion is far more in times of corona crisis. Discuss opportunities and challenges with respect to policies like JAM trinity during corona pandemic. Suggest other alternatives for such transfers.”

Conclusion

There is nothing compelling about the use of women’s JDY accounts for cash relief. In fact, it is a bit of a shot in the dark. The government do well to consider other options for further relief majors, including a switch to the NREGA job-cards list in rural areas.

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now