Bank Accounts for the Unbanked: Evidence from a Big Bang Experiment

Abstract

We study PMJDY, a “big bang” intervention in India that aimed to eliminate financial exclusion in one shot by giving bank accounts to all its unbanked. Us- ing proprietary individual-level bank account data, we show significant uptake, usage, and balance accumulation in the new accounts. Moreover, accounts appear to help hedge local shocks, indicating that inclusion helps household risk management. The results suggest that financial exclusion reflects a supply gap rather than the absence of demand or that large-scale supply interventions like the PMJDY can stimulate demand for formal finance that subsequently grows through experiential learning-by-doing.

Keywords: financial inclusion, household finance, savings, financial literacy, bank accounts

JEL Classification: G21, D14, O16