Direct Benefit Transfer

SYLLABUS

GS II   >      Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

REFERENCE NEWS

• The introduction of the Gruha Lakshmi scheme by the Karnataka government has reignited the policy debate of direct benefit transfers vs fiscal prudence. The scheme guarantees a direct monthly cash transfer of ?2,000 to women who are the heads of below-poverty-line households in Karnataka.

ABOUT DIRECT BENEFIT TRANSFER (DBT):

• The Direct Benefit Transfer (DBT) programme was launched on January 01, 2013.
• It was initiated with the goal of improving the delivery system of the welfare initiatives of the Government of India and reforming the procedures of existing social schemes. The program has aimed at transfer of subsidies and cash benefits directly to the people through their Aadhaar seeded bank accounts.
• While launching, it was hoped that crediting subsidies into the bank accounts would substantially reduce leakages, and associated delays.  Earlier the funds flowed through a multiple layers of administrative offices till it reaches the end beneficiary, invariably leading to delays. DBT has eliminated the extra layers.

COMPONENTS OF DBT

• Primary components in the implementation of DBT schemes include:
  • Beneficiary Account Validation System
  • A robust payment and reconciliation platform integrated with RBI, NPCI and Beneficiary Banks (Public/Private Sector Banks, Regional Rural Banks and Cooperative Banks). It includes the Core Banking Solutions of banks, Settlement Systems of RBI, Aadhaar Payment Bridge of NPCI.

TYPES OF SCHEMES COVERED IN DBT:

BENEFITS:

• Accurate targeting: Accurate targeting of genuine and deserving beneficiaries by removal of duplicate/ fake beneficiaries. Ex:35,000 families drawing kerosene subsidies in spite of having LPG connections were weeded out in Chandigarh.
• Timely delivery of benefits to people: For instance, time required to transfer benefits of Pradhan Mantri Matru Vandana Yojana brought down to 30 days. 
• Enhance financial inclusion: For example, 7,00,000 Janani Suraksha Yojana mother beneficiaries have opened bank accounts in Bihar.
• Cumulative savings: Estimated cumulative savings/ benefits of around 2.2 Lakh crore (up to March 2021) through plugging of leakages & reduction in structural expenditures;
• Efficiency and effectiveness in governance: Bring efficiency, effectiveness in governance and infuse confidence of citizens in the Government. Ex- Disbursement of social security pension amount at the doorsteps of the beneficiaries in Krishna District (AP) with the help of Business correspondents.
• Enhance transparency & accountability: Enhance transparency and accountability in the government system as Public Distribution System (PDS) services are provided to beneficiaries based on biometric authentication.
• Data led governance: Data led governance by making use of the data generated from the DBT system. Ex: Nutrition and Health Tracking System in Andhra Pradesh.
• Digitalisation: DBT is assisting India in accelerating its transition toward a cashless economy.

CHALLENGES:

• Lack of awareness: Several beneficiaries were not aware of their entitlements and missed out on benefits.
• Infrastructure deficits: Especially rural & tribal areas don’t have adequate banking facilities and road connectivity. For instance, one ATM available on an average for ten villages of rural India.
• Lack of financial literacy: Only 27% of Indian adults and 24% of women meet the minimum level of financial literacy as defined by the RBI. 
• Coverage of Beneficiaries: Various DBT schemes, including the PM-Kisan, Telangana government’s Rythu Bandhu and Andhra Pradesh’s YSR Rythu Bharosa do not reach tenant farmers, i.e., those who undertake cultivation on leased land.
• Lack of Accessibility: Lack of accessibility to enrolment points and unavailability or erratic availability of officials/operators responsible for enrolment.
• Low level of digital literacy: Low level of digital literacy among people living in rural areas. Ex: Recipients make several journeys to banks to check on & withdraw funds. This resulted in significant opportunity costs for the rural poor.
• Internet connectivity issues: Internet connectivity issues & other technical difficulties like biometric failure plague bank correspondents.
• Disruption in the process: Disruption in the process in terms of receiving money in their bank accounts through DBT. Reasons for disruptions could be spelling errors in Aadhaar details, pending KYC, frozen or inactive bank accounts, mismatch in Aadhaar and bank account details.
• Delay in payment: Money not being deposited in accounts on time. For instance, MGNREGA wage payments were delayed for 71 per cent of the transactions beyond the mandated 7 days.
• Cash transfers are not inflation indexed: Cash transfers are not inflation-indexed, as a result of which the transferred monetary value is less than the market value of the goods to be purchased.
• Time-consuming: Going to the bank to withdraw money and then purchasing goods takes a longer time than going to the ration shop to obtain their fortnightly rations.
• Exploitation by banks: Banks were discovered to be adjusting the money beneficiaries received with any outstanding loans they had, rendering them unable to buy the goods & services.
• Inadequate grievance redressal mechanisms: Inadequate grievance redressal mechanisms to resolve grievances like non-receipt of funds or transaction failure. Between April-June 2020 ~1.47% of 830 million (i.e. ~12 million) transactions failed
• Regional disparities in DBT implementation: West Bengal , Arunachal Pradesh and Assam lagging behind in DBT performance ranking of States

WAY FORWARD:

• Augment the availability of enrolment points for citizens across schemes specifically in rural and peri-urban areas.
• Increase Accessibility in rural areas : Increased number Bank branches in rural regions along with improved physical connectivity to banking centers.
• Ensure adequate compensation for BCs & Allow BC agents to ‘white-label’ their services to multiple banks, which means BCs can sell products from multiple banks to a customer. This will help in enhancing reach and last-mile delivery.
• Adopt a strategic approach to Awareness, Communication, and Outreach (ACO) for G2P (Government to Person) programs. Dedicated campaigns keeping in mind low level of literacy among beneficiaries.
• Choice-based DBT system until resolving bottlenecks: People could be given the option of switching to cash transfers or remaining with subsidized kind transfers(eg:food) to protect the most vulnerable against suboptimal implementation.
• Timely transfer of money to beneficiaries: to ensure basic minimum needs of the poor.
• More pilot initiatives with a focus on beneficiary convenience rather than government cost savings. The system should address common consumer risks such as unreliable network or service, complex user interfaces & inadequate payment processes that force recipients to ask others for assistance and share personal information.
• A dynamic database (updated on real-time basis) of social safety programmes that are categorized according to families and segments, such as occupation, gender, condition, and income level should be maintained.
• Doorstep delivery of cash benefits for providing a safety net to those who cannot travel to access points (like the elderly, differently-abled & women customers constrained by safety concerns or regressive social norms)
• Promote the use of digital payments: This will allow beneficiaries to use the benefit amount without visiting a withdrawal point, which would save them time and cost.
• A common grievance redress cell with a simple procedure for all DBT schemes across tiers — State, district, and block to help the beneficiaries resolve their issues immediately
• Beneficiaries should be given the opportunity to provide feedback on the manner in which benefits are distributed. This would enable the Government to take corrective steps in case of any gaps.
• Technology solutions should be developed to identify, monitor and rectify issues like transaction failure or delays. 

Hence, Direct Benefit Transfer ensures a more transparent and efficient system, reducing leakages and corruption. The DBT model stands as a significant step towards the government’s commitment to ‘Minimum Government, Maximum Governance.’

PRACTICE QUESTION:

Q. Direct Benefit Transfer is a good step towards reforming the government delivery system. Discuss.(10M,150W)