Jan Dhan accounts not viable: BCG

Chennai: At the current level of balance they maintain, Jan Dhan accounts are not viable for banks. Despite a steady growth in 2018, deposit per account has not returned to the post-demonetisation levels.

At Rs 2514, the average Jan Dhan account balance in 2018 was just 10 per cent of the average savings account balance of Rs 22,812, according to BCG Consulting. At such a low balance, Jan Dhan accounts are not viable for banks.   

"For every account there is a one-time cost on customer acquisition and onboarding. Then there is servicing cost on providing the customer with facilities including cheques, debit cards and credit cards. A bank needs to have a certain minimum balance to offer these services. Even for a no-frills account like Jan Dhan, where a customer has been digitally acquired and digitally serviced, an account should have a balance of Rs 12,000 to Rs 15,000 for it to be viable. At the current average account balance of Rs 2500, a Jan Dhan account is not viable for the banks," said Abhinav Bansal, principal, BCG Consulting.    

The average balance of Jan Dhan account has grown from Rs 1700 in 2016 to Rs 2500 in 2018. The growth has mainly happening due to direct benefit transfer schemes. However, the balance will still take a longer time to get to the level where it will become viable for the banks.

This has led to a situation where many account holders keep it idle, without making transactions. However, banks are reducing their acquisition costs and leveraging data to service the customers. This will help them find out ways to make such accounts viable in the future.

Post demonetization, the deposit per Jan Dhan account had surged to Rs 2643 from Rs 1785, but then it dropped to Rs 2218 within a few months. Despite growing ever since, they have not returned to the post demonetization levels.