Economic Survey: Gujarat a poor performer in saving account coverage, direct bank transfer preparedness

By A Representative
The recently released Government of India’s (GoI’s) “Economic Survey 2015-16” has come up with a major revelation: That Gujarat, which claims itself to be the financial capital of the country, has, ironically, one of the poorest saving bank penetration in the country, adversely affecting the GoI’s direct bank transfer (DBT) thrust.
In fact, the Survey also finds that Gujarat has one of the poorest DBT penetration index, too, whether it is rural areas or urban areas. No explanation has been given as to why the "model" state's banking sector is relatively poor spread. 

The Survey says that, in Gujarat, what it calls “basic saving account coverage” is just about 40 per cent, less than the national average of 46 per cent. The two-volume report, in fact, finds that as many as 15 other major Indian states out of 20 have a higher “basic account coverage” than Gujarat’s.
Pointing out that the basic account coverage is particularly important because of the Government of India’s thrust on direct bank transfer, the Survey says, “After identifying beneficiaries, the government must transfer money to them. Every beneficiary needs a bank account and the government needs their account numbers.”
While claiming that “this constraint has been significantly eased by the Pradhan Mantri Jan Dhan Yojana, under whose auspices nearly 120 million accounts were created in the last year alone— at a blistering, record-setting pace of over 3 lakh accounts per day – the Survey says, “despite Jan Dhan’s record-breaking feats, basic savings account penetration in most states is still relatively low – 46 per cent.”
Pointing out that it is “above 75 per cent in only two states (Madhya Pradesh and Chattisgarh)”, the Survey says, “Policymakers thus need to be cognizant about exclusion errors due to DBT not reaching unbanked beneficiaries.”
“In rural India, the Survey says, “There is a serious last-mile problem of getting money from banks into household’s hands: only 27 per cent of villages have a bank within 5 km.”
Coming up with yet another inter-state comparison – direct bank transfer (DBT) index, the survey, simultaneously, finds that Gujarat is one of the poor performing states. Thus, with 27 per cent DBT preparedness score in urban areas and a mere 2.19 per cent in the rural areas, the Survey says, “The binding constraint (for DBT) is basic bank account penetration—paying beneficiaries is the issue, not identifying them.”

Among urban areas, the Survey says, “There is significant variation across states. Some, like Madhya Pradesh and Chattisgarh, show preparedness scores of about 70 per cent. Others, like Bihar and Maharashtra, have scores of only about 25 per cent.”
Coming to the rural areas, the survey says, “The DBT rural preparedness scores are significantly worse than the urban scores, with an average of 3 per cent and a maximum of 5 per cent (Haryana).”
Interestingly, the Survey finds that in urban areas, as many as 14 major Indian states have a better DBT preparedness than Gujarat. As for the rural areas, the Survey reveals that as many as 16 out of 20 major Indian states have a better DBT penetration than Gujarat.