Pariksha SaathiLesson 7 of 10 · Banking and Financial Awareness
Financial Inclusion: Lead Bank Scheme, Priority Sector and Jan Dhan to MUDRA
Drafted with AI assistance and fact-checked on 28 October 2026; not yet read line by line by a human editor. Spotted a mistake? Tell us. Editorial standards & corrections
What financial inclusion means
Financial inclusion is giving every household, especially the poor and people in villages, access to basic financial services, a bank account, credit, insurance, pension and remittances, at an affordable cost. The Rangarajan Committee on Financial Inclusion (2008) defined it as ensuring access to financial services, and timely and adequate credit, for vulnerable groups such as weaker sections and low-income groups at an affordable cost. It matters because a bank account lets subsidies reach people directly, protects savings from moneylenders and opens the way to formal credit and insurance. India built inclusion in stages: directing branches and credit to neglected areas after 1969, reaching villages through agents after 2006, and a mission-mode push for accounts and insurance after 2014.
Lead banks and the priority sector
The Lead Bank Scheme, introduced by the RBI in 1969 on the recommendations of the Gadgil Study Group and the Nariman Committee, gives each district to one bank as its lead bank. The lead bank coordinates all banks in the district, prepares the district credit plan and convenes the District Consultative Committee. Priority sector lending asks banks to give a fixed share of credit to sectors that would otherwise be neglected: agriculture, micro, small and medium enterprises, export credit, education, housing, social infrastructure, renewable energy and weaker sections. Domestic commercial banks must lend 40 per cent of adjusted net bank credit (ANBC), or of the credit equivalent of off-balance-sheet exposure if that is higher, to the priority sector, while regional rural banks and small finance banks have higher targets. Banks that over-achieve can sell priority sector lending certificates (PSLCs) to banks that fall short. The Kisan Credit Card scheme of 1998 gives farmers a revolving credit limit for crop needs.
Agents and Jan Dhan
In 2006 the RBI allowed banks to use business correspondents (BCs), agents such as retired staff, shopkeepers or NGOs, who open accounts and handle small deposits and withdrawals in villages with a hand-held device or micro-ATM. The Pradhan Mantri Jan-Dhan Yojana (PMJDY), announced on 15 August 2014 and launched on 28 August 2014, aimed first at a bank account for every household and later for every adult. Its accounts are basic savings bank deposit accounts with no minimum balance, a RuPay debit card carrying accident insurance and an overdraft facility for regular users. Its motto is Mera Khata, Bhagya Vidhata. Jan Dhan accounts, Aadhaar and mobile phones together form the JAM trinity used for direct benefit transfer.
Insurance and pension schemes of 2015
Three schemes were launched together on 9 May 2015. Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) is a one-year renewable term life cover of Rs 2 lakh for death from any cause, for account holders aged 18 to 50. Pradhan Mantri Suraksha Bima Yojana (PMSBY) is a one-year renewable accident cover for ages 18 to 70: Rs 2 lakh for accidental death or total permanent disability and Rs 1 lakh for partial permanent disability. Premiums for both are auto-debited from the bank account each year. Atal Pension Yojana (APY), aimed mainly at workers in the unorganised sector aged 18 to 40, gives a guaranteed monthly pension of Rs 1,000 to Rs 5,000 from age 60, depending on contributions; it is administered by PFRDA and replaced the earlier Swavalamban scheme.
Credit for small enterprises
Pradhan Mantri MUDRA Yojana (PMMY), launched on 8 April 2015, gives collateral-free loans to non-corporate, non-farm micro and small enterprises for income-generating activities. MUDRA (Micro Units Development and Refinance Agency) is a subsidiary of SIDBI; it does not lend directly but refinances the banks, NBFCs and microfinance institutions that do. As designed in 2015 the loans had three stages named after stages of growth: Shishu, up to Rs 50,000; Kishore, above Rs 50,000 and up to Rs 5 lakh; and Tarun, above Rs 5 lakh and up to Rs 10 lakh. Stand-Up India, launched on 5 April 2016, supports bank loans of Rs 10 lakh to Rs 1 crore for a new (greenfield) enterprise to at least one Scheduled Caste or Scheduled Tribe borrower and at least one woman borrower per bank branch; refinance for these loans is available through SIDBI.
Savings for the girl child
Sukanya Samriddhi Yojana, launched on 22 January 2015 at Panipat (Haryana) under the Beti Bachao Beti Padhao campaign, is a small savings account that a parent or guardian opens for a girl below 10 years of age at a post office or an authorised bank. Deposits are made for 15 years and the account matures 21 years after it is opened; part of the balance can be withdrawn for higher education once the girl turns 18. It has exempt-exempt-exempt tax treatment, and its interest rate is notified by the government every quarter. Because the insurance, pension and benefit schemes run through a bank account, the Jan Dhan account is the base of the whole structure.
Key facts
- Lead Bank Scheme: RBI, 1969, on the Gadgil Study Group and Nariman Committee reports; one lead bank for each district.
- Priority sector target for domestic commercial banks: 40 per cent of adjusted net bank credit; surplus lending can be sold as PSLCs.
- Business correspondents were allowed by the RBI in 2006 to provide branchless banking in villages.
- PMJDY: announced 15 August 2014, launched 28 August 2014; zero-balance account, RuPay card with accident cover, overdraft; motto Mera Khata, Bhagya Vidhata.
- PMJJBY (9 May 2015): life cover of Rs 2 lakh for ages 18 to 50; PMSBY (9 May 2015): accident cover of Rs 2 lakh for ages 18 to 70.
- Atal Pension Yojana (9 May 2015): ages 18 to 40, pension of Rs 1,000 to Rs 5,000 a month from age 60, run by PFRDA, replaced Swavalamban.
- PM MUDRA Yojana (8 April 2015): bands at launch were Shishu up to Rs 50,000, Kishore up to Rs 5 lakh and Tarun up to Rs 10 lakh; MUDRA is a SIDBI subsidiary.
- Stand-Up India (5 April 2016): bank loans of Rs 10 lakh to Rs 1 crore for new enterprises of SC/ST and women entrepreneurs; refinance through SIDBI.
- Sukanya Samriddhi Yojana (22 January 2015, Panipat): girl below 10, deposits for 15 years, matures 21 years after opening.
Quick revision
Rangarajan Committee 2008; Lead Bank Scheme 1969 (Gadgil, Nariman); priority sector 40% of ANBC, PSLCs; KCC 1998; BCs 2006; PMJDY 28 August 2014 (Mera Khata, Bhagya Vidhata); PMJJBY Rs 2 lakh life (18-50), PMSBY Rs 2 lakh accident (18-70), APY Rs 1,000-5,000 pension (18-40, PFRDA), all 9 May 2015; MUDRA 8 April 2015 (Shishu, Kishore, Tarun; SIDBI subsidiary); Stand-Up India 5 April 2016; Sukanya Samriddhi 22 January 2015.