Banking Reforms: Demonetisation, Jan Dhan, UPI, and Financial Inclusion

Banking reforms and digital payments are increasingly tested in PSC exams. This topic bridges traditional banking knowledge with current affairs. Expect 3-4 questions per paper.

Demonetisation (8 November 2016)

Aspect	Detail
Announced by	PM Narendra Modi (8 PM address)
Notes demonetised	Rs. 500 and Rs. 1,000 (Mahatma Gandhi Series)
New notes introduced	Rs. 500 (new) and Rs. 2,000
Value demonetised	Rs. 15.44 lakh crore (86% of currency in circulation)
Exchange window	Till 30 December 2016
Deposit deadline	30 December 2016 (banks); 31 March 2017 (RBI)
Amount returned to RBI	Rs. 15.31 lakh crore (99.3% returned)

Stated Objectives

• Curb black money and counterfeit currency
• Push towards digital/cashless economy
• Disrupt terror financing
• Formalise the economy (increase tax base)

Previous Demonetisations in India

Year	Notes Demonetised	PM
1946	Rs. 1,000 and Rs. 10,000	Pre-independence
1978	Rs. 1,000, Rs. 5,000, Rs. 10,000	Morarji Desai
2016	Rs. 500 and Rs. 1,000	Narendra Modi

Pradhan Mantri Jan Dhan Yojana (PMJDY)

Feature	Detail
Launched	28 August 2014
Objective	Financial inclusion — bank account for every household
Zero balance	No minimum balance required
RuPay debit card	Free with every account
Accident insurance	Rs. 2 lakh (with RuPay card)
Life insurance	Rs. 30,000 (for accounts opened before 26 Jan 2015)
Overdraft facility	Up to Rs. 10,000 (after 6 months satisfactory operation)
Accounts opened	Over 52 crore (as of 2024)
Guinness Record	Most bank accounts opened in 1 week (1.8 crore in first week)

JAM Trinity

Component	Full Form	Purpose
J	Jan Dhan (bank accounts)	Direct benefit transfer
A	Aadhaar (biometric ID)	Authentication
M	Mobile (phone connectivity)	Access and communication

Digital Payment Systems

UPI (Unified Payments Interface)

Feature	Detail
Launched	11 April 2016
Developed by	NPCI (National Payments Corporation of India)
Regulator	RBI
Transaction limit	Rs. 1 lakh per transaction (Rs. 2 lakh for some categories)
Works 24x7	Yes, including holidays
Major apps	PhonePe, Google Pay, Paytm, BHIM
Monthly transactions (2024)	Over 1,200 crore
UPI Lite	For small-value offline transactions (up to Rs. 500)

BHIM App

Feature	Detail
Full form	Bharat Interface for Money
Named after	Dr. B.R. Ambedkar (Bhim = Bhimrao)
Launched	30 December 2016
Developed by	NPCI
Based on	UPI platform

Other Digital Payment Modes

System	Full Form / Detail	Operator
NEFT	National Electronic Funds Transfer	RBI
RTGS	Real Time Gross Settlement (min Rs. 2 lakh)	RBI
IMPS	Immediate Payment Service (24x7)	NPCI
NACH	National Automated Clearing House	NPCI
AePS	Aadhaar-enabled Payment System	NPCI
RuPay	Indian domestic card network	NPCI
e-RUPI	Voucher-based digital payment (Aug 2021)	NPCI
CBDC (e-Rupee)	Digital Rupee pilot (Dec 2022)	RBI

NPCI (National Payments Corporation of India)

Feature	Detail
Established	2008
Promoted by	RBI and IBA (Indian Banks’ Association)
Products	UPI, RuPay, BHIM, IMPS, AePS, NACH, FASTag, NETC
Type	Section 8 (not-for-profit) company

Public Sector Bank Mergers

2019 Mega Merger (Effective 1 April 2020)

Anchor Bank	Merged With	New Entity
Punjab National Bank	Oriental Bank of Commerce, United Bank	Punjab National Bank
Canara Bank	Syndicate Bank	Canara Bank
Union Bank of India	Andhra Bank, Corporation Bank	Union Bank of India
Indian Bank	Allahabad Bank	Indian Bank

Earlier Mergers

Year	Merged Bank	Into
2017	Bharatiya Mahila Bank	SBI
2017	5 SBI Associates + SBBJ	SBI
2019	Dena Bank, Vijaya Bank	Bank of Baroda

Result: Public sector banks reduced from 27 (2017) to 12 (2020).

NBFC Crisis (2018-19)

Aspect	Detail
Trigger	IL&FS default (September 2018)
IL&FS	Infrastructure Leasing and Financial Services
Default amount	Rs. 91,000 crore in debt
Impact	Liquidity crisis across NBFC sector
Government action	Superseded IL&FS board; appointed Uday Kotak as chairman
RBI response	Operation Twist, LTRO, TLTRO to inject liquidity
Key NBFC failures	DHFL, PMC Bank co-operative (different category)
Regulatory change	RBI got powers over Housing Finance Companies (from NHB)

Financial Inclusion Schemes

Scheme	Year	Objective
PMJDY	2014	Universal bank accounts
MUDRA (Micro Units Development and Refinance Agency)	2015	Loans up to Rs. 10 lakh to micro enterprises
Stand Up India	2016	Loans Rs. 10 lakh to 1 crore for SC/ST/women entrepreneurs
PM SVANidhi	2020	Micro-credit for street vendors
PM Vishwakarma	2023	Collateral-free loans for traditional artisans

MUDRA Loan Categories

Category	Loan Amount	Stage
Shishu	Up to Rs. 50,000	Start-up
Kishore	Rs. 50,001 to Rs. 5 lakh	Growth
Tarun	Rs. 5,00,001 to Rs. 10 lakh	Expansion

Insurance and Pension Schemes

Scheme	Premium	Cover	Age Group
PM Jeevan Jyoti Bima Yojana (PMJJBY)	Rs. 436/year	Rs. 2 lakh life cover	18-55 years
PM Suraksha Bima Yojana (PMSBY)	Rs. 20/year	Rs. 2 lakh accidental death	18-70 years
Atal Pension Yojana (APY)	Variable	Rs. 1,000-5,000/month pension	18-40 years

Key Banking Reforms Timeline

Year	Reform
1969	Nationalisation of 14 banks
1980	Nationalisation of 6 more banks
1991	Narasimham Committee-I (liberalisation)
1998	Narasimham Committee-II (strengthening)
2014	Jan Dhan Yojana
2015	MUDRA Bank; Indradhanush plan for PSBs
2016	Demonetisation; UPI launched
2016	Insolvency and Bankruptcy Code (IBC)
2017	SBI merger
2020	PSB mega merger (27 to 12)
2022	Digital Rupee (CBDC) pilot

PSC Repeated Questions

Question	Answer
Demonetisation date	8 November 2016
Notes demonetised in 2016	Rs. 500 and Rs. 1,000
PMJDY launched on	28 August 2014
UPI developed by	NPCI
BHIM full form	Bharat Interface for Money
BHIM named after	B.R. Ambedkar
Number of PSBs after 2020 merger	12
MUDRA highest category	Tarun (up to Rs. 10 lakh)
JAM stands for	Jan Dhan, Aadhaar, Mobile
PMSBY premium	Rs. 20/year
PMJJBY premium	Rs. 436/year
First demonetisation in independent India	1978 (Morarji Desai)
e-RUPI launched in	August 2021
Digital Rupee pilot began	December 2022