India’s financial inclusion project is titanic. KYC could be the iceberg that sinks it

Long queues formed outside bank branches across India in 2014 and 2015, with a range of people opening their bank account for the first time. These were farmers, day labourers, homemakers—Indians who had largely been neglected by the formal banking system until then.This moment was part of the Indian government’s Jan Dhan Yojana Scheme, which enabled people to open zero-balance bank accounts at no cost. By the end of 2015, when the initiative ended, 250 million accounts had been opened.Jan Dhan Yojana was a success, so much so that the State Bank of India reported in 2021 that the country had surpassed China in financial inclusion metrics.Now, many of the bank accounts opened under the scheme are up for re-verification KYC (know-your-customer) procedures. Even though the process is straightforward—a check of listed documents such as one’s Aadhaar or PAN—many account owners can’t complete it. Besides, banks have little incentive to keep the accounts active.The situation on the ground is at odds with the intention of bringing more of India’s population into the formal banking system. Sarthak Gupta unpacks the contradiction in this edition of Make India Competitive Again, as read by Snigdha Sharma.