CASIRJ Volume 5 Issue 3 [Year ] ISSN

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1 Twin Pillars of Direct Benefit Transfer Scheme in India By Deepika Jindal Assistant Professor, Commerce Daulat Ram College, Delhi University ABSTRACT The Government of India has launched various schemes for rural development and welfare in areas of employment, education, health, housing such as MNREGA, RSBY, PMGSY, SLBC, SSP to name a few. Also, Indian Government along with Reserve Bank of India is paving way towards Financial Inclusion- bringing banking services to lower level of pyramid. These two efforts are being integrated with the Direct Benefit Transfer Scheme or commonly refer as DBT scheme which was launched on 1 st Jan The Direct Benefit Transfer scheme was launched to curb the rampant leakages, corruption and frauds in the implementation of the various social and welfare schemes and programmes. The implementation of Direct Benefit Transfer scheme rests on two pillars- Aadhar number generation by UIDAI authority and Financial Inclusion- Opening of Bank accounts. But they are various challenges while building these two pillars especially with respect to rural areas. This article focuses on problems being faced in rural areas while issuing of Aadhar cards and bringing the people of rural areas under the umbrella of Financial inclusion. Also suggest ways oh how to overcome these issues of lack of infrastructure, trained human resource and awareness for the effective implementation of Direct Benefit Transfer scheme in rural areas of India. Keywords: Direct Benefit Transfer scheme, Financial Inclusion, Financial literacy, Business Correspondent model, Aadhar card OBJECTIVE The objective of this paper is to study about the structures specifically Aadhar card and Financial Inclusion on which the implementation of Direct Benefit Transfer Schemes rests. Also to study the problems being faced in these two structures or pillars while implementation of this scheme in rural India and provide recommendations for the same. INTRODUCTION Page 27

2 The government of developing countries have introduced various welfare schemes and programmes for economic development and social welfare of the common people. But these schemes which involve manual transfer of money or subsidies given through the intermediaries have not been effective as they are lot of leakages and corruption in the system. Direct cash transfer or Direct Benefit Transfer scheme is one way of minimising these challenges. It is an initiative which is taken by the various countries such as Brazil, Mexico and Latin American countries in which government subsidies and other benefits are directly transferred to beneficiaries in cash. Thus cash transfers provide modest and regular income to household to meet their expenses on food, health and educational facilities. It helps the people to improve their standard of living and equip them with better means to face sudden shocks such as natural calamities. It can be of two types- conditional and unconditional. In case of conditional, cash is only transferred when the beneficiaries follow certain criteria such as, make some pre specified Investment in educating their children. On the other hand, unconditional Direct Benefit Transfer refers to cash transfer that doesn t require any condition to be fulfilled. The below represents the various advantages of Direct Benefit Transfer scheme to the people of a country in terms of building human capital as in education, health and income generation. Figure 1: Scope of Direct Cash Tranfers Source: Direct Benefit Transfer Scheme in India In case of social and economic development some of the major issues India faces are the problem of poverty, unemployment, health and education. For this the Government of India has rolled out various schemes such as: Page 28

3 MNERGS (Mahatma Gandhi National Rural employment scheme) RSBY (Rashtriya Swasthya Bima Yojna) SSP (Social security pension) SGSY (Swarnjayanti Gram Swarozgar Yojna) Indra Awas Yojna Dhanlakshmi Scheme Janani Suraksha Yojna Top Class Education Scheme In case of making payments to beneficiaries manual method was used where the payment by the Government reaches to the ultimate beneficiary by various intermediaries or middlemen. This method involved lot of leakages and embezzlement of funds i.e. payments were not given to beneficiary at all or middlemen used to pocket the money and amount paid to the ultimate beneficiary was less than the actual amount. Also, in a recent study by the Planning Commission, it was ascertained that the Public Distribution System (PDS) is so ineffective that 58% of the subsidized grains do not reach the targeted group and almost a third of it is trajected off the supply chain. Thus to overcome these hurdle, there was shift to direct benefit transfer method. The Prime Minister Dr Manmohan Singh has approved the setting up of a National Committee on Direct Cash Transfers chaired by himself and an Executive Committee on Direct Cash Transfers. The goal of these committees is to rapidly rollout cash transfers across the country for as many government schemes and benefits as possible. On 1 st Jan 2013, the Government of India announced the plan to launch the DBT scheme in 43 districts in 26 selected central sector and centrally sponsored schemes in a phase wise manner. Figure 1: Phase wise implementation of Direct Benefit Transfer Scheme Page 29

4 Source: Under the DBT scheme, the benefits are directly transferred to the beneficiaries by seeding their Aadhar card numbers with the bank accounts. The scheme cover areas such as scholarships, pensions and unemployment allowances, wage disbursement of MNREGA and Public Distribution Schemes. Figure 3: Payment process through Aadhaar Card Page 30

5 Source: The Direct Benefit Transfer Scheme includes three types of transfers: Cash transfers includes unemployment assistance, payment of MNREGA, pensions where cash is not meant to be used for any specific purpose Benefit transfers includes scholarships, Indira Awaas Yojna where cash is given to increase the consumption of specific goods or services Subsidy transfers include transfer for kerosene, LPG, fertilisers where Government transfers full or partial cash to beneficiaries in lieu of the subsidised physical good. RESEARCH METHODOLOGY The study has been done by using secondary data and analysis and interpretation is done on based on sources available and author s own interpretation. DATA ANALYSIS Challenges in implementation of Direct Benefit Transfer Scheme The implementation of Direct Benefit Transfer scheme rests on twin pillars: Aadhar Generation and financial inclusion of the beneficiaries. In case of rural India, there are various challenges being faced in these two areas which are discussed below. A. AADHAR GENERATION Page 31

6 The Aadhar card is a 12 digit unique identification number issued by Unique Identification Authority of India (UIDAI) which will be linked to Bank account of the beneficiary where the payment will be transferred. All the individuals of a single household will have a separate Aadhar no. During the Aadhar enrolment the information about an individual is collected- name, address, birth date or age, photograph is captured as well as biometric details are taken by scanning the 10 fingerprints and iris. The issuance of the card is not an OTC or over the counter system which refers to that the beneficiary is not issued the card at the time of enrolment. It usually takes days after receipt of data packet by UIDAI data centre where data undergoes various stages of screening and data validation. The delays in issuing these cards will create a roadblock in the path of implementation of Direct Benefit Transfer scheme. As of 31 st Jan 2014, crores Aadhaar cards have been issued and still there is a long way to go. The challenges being faced while the enrolment and issuance of the Aadhaar cards are somewhat similar to those being faced while enrolment and issuance of smart cards under RSBY and NREGA schemes. They are as follows: 1. Identifying the beneficiary: The enrolment team that going for making the cards for various schemes uses two type of data pre populate or unpopulated data. In case of schemes like RSBY where pre populate data provided by Government is used. The beneficiary data so provided contains duplicates i.e. name of the same person is repeated more than once or ghosts i.e. name of a non existence beneficiary is mentioned or doesn t contain all the member names. The presence of duplicates and ghosts will lead to enrolment of same person many times or enrolment of people who are not the actual beneficiaries. On the other hand in case of UID, as no pre populated data is available, the operators can also enter fictional information. 2. Problem in capturing biometric detail: As the people in the villages are involved in hard physical labour, the conditions of their hands are not so good. Thus it becomes difficult and sometimes impossible to capture their fingerprints. In such cases it becomes a task to enrol such person. 3. Power issue: An enrolment kit which includes laptop, webcam, finger card reader, retina scan which are used for capturing the demographic and biometric details at the field. All this requires electricity to run and most of villages don t have regular supply of power as well as internet connectivity to upload the data. This leads to decrease in productivity in doing the enrolment and increase in time lag of sending data to UIDAI data centre for data verification and quality check. 4. Accessibility: The villages in India are far flanked and some are in the areas where road connectivity is not there and it becomes difficult to tap them. Thus it becomes difficult to enrol these people for Aadhar cards as well as for various schemes. 5. Awareness: Most of the people are not aware of these schemes and how to avail benefit of it. They do not have an idea about what is the operational procedure to get themselves enrolled. In case of RSBY munadi i.e. announcements is done and chits are distributed to create awareness about scheme 2-3 days before in the village where enrolment is going to take place. But in practice usually munadi is done on the day of enrolment and chits are Page 32

7 not distributed to all the households. Thus less people turn out for enrolment. Also certain times people are misguided where the operator charges them a fee for making Aadhar card which in actual is free of cost. 6. Time of enrolment: The time when the enrolment is done plays a crucial factor in turnout of the people. During the festival, marriages and harvesting season people are otherwise involved hence don t turn up at the camp for getting themselves enrolled. This leads to low rate of enrolment. In most cases it comes out to add on cost for the enrolment teams to visit the revisit the village again. 7. Crowd Management: There are times when there is lot of rush at the enrolment centre where each person wants to get enrolled first. This creates lot of chaos and confusion as the enrolment team consisting of 2-3 people find it difficult to manage the huge rush. As a result enrolment sometimes enrolment has to be stopped in between. Also, at times due to stampede they are chances that enrolment kits can get damage which adds to cost and undue delays as it becomes difficult to get the kits repaired immediately in rural areas. B. FINANCIAL INCLUSION: OPENING BANK ACCOUNTS Another major mainstay of Direct Benefit transfer is opening saving bank account which directs towards financial inclusion. Financial inclusion refers to The process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost -The Committee on Financial Inclusion (Chairman: Dr. C. Rangarajan, 2008, RBI Website). India has around 6 lakhs villages and most of them do not have banks due to high administrative cost and low volume of business in these areas. Even though they are branches in some villages they are vary off hence for rural people to go such long distance to avail bank service is costly (travel expense as well as loss of one day wage) and time consuming. Thus in 2006 RBI came with the Information and Communication based Business Correspondent model where banks could hire Business Correspondents or BC as intermediaries to conduct banking business outside the banking premises. It refers to shifting from the Brick and mortar model to door step banking. The BC model allows banks to do cash in - cash out transactions at a location much closer to the rural population, thus addressing the last mile problem. The various issues faced in the path of opening and operating saving bank accounts are as follows: 1. Lack of Financial literacy: The rural people are unaware about the general banking concept and process of banking system: how to open a saving account, withdraw money and deposit cash by filling pay in slip. This creates hesitancy on their part to adopt a system of which they have non-existence knowledge. Page 33

8 2. Ethical issues: There are cases where rural people who are financial illiterate open and operate accounts with the help of BCs and their agents who take undue advantage of their lack of awareness. For example, they take commissions not required or enter incorrect amount while withdrawing. This lack of integrity removes the trust of the rural people on banking system and they approach the moneylenders for these facilities. 3. Operation Delays: The processing of opening a new account usually takes 2-3 months as the details of customer are captured and send to the bank for the approval where in only then account is opened. Hence by that time the customer lose interest in opening the bank account. 4. Technical issues: For carrying out transactions the BCs use POS terminals (Point of sale) and utilities which are not functioning properly in many areas hence BCs are not able to do transactions correctly. Thus the customers are unable to deposit or withdraw money which creates inconvenience for them. 5. Lack of training of BCs: The BCs so appointed are not provided proper training; training on how to deal with the customers and explaining to customers about the various financial products. Also they lack technical training to operate the POS machines and equipments. 6. Viability of BC model: The revenue generated by the BCs with respect to cost incurred to undertake BC operation is not fruitful. Also remuneration paid to BCs is very less or is not paid on time thus thereby increasing the chance of default by them. This adversely affects the customer and decreases their trust on the banking system. RECOMMENDATIONS Thus efforts are required to overcome these challenges during UID enrolment and financial inclusion in order to make Direct Benefit Transfer scheme effective. Training of enrolment operators in crowd management as well as technical skills to increase the efficiency in no. of enrolments being done daily. In depth checking of enrolment data so as to avoid the cases of duplication and ghosts Availability of sound infrastructure in terms of electricity and connectivity of areas so that facility of banking service can be provided to all. Creating awareness about the scheme as well as it operational process by publicising it on TVs, radios and through NGOs so that people are not been made taken advantage of. Stress on spreading financial literacy by joining hands with MFIs and NGOs to organise more financial literacy camps so that more and more people in rural areas know about the advantages of using banking services and various banking products. Page 34

9 BCs should be provided periodically technical training and adequate incentives to motivate them to work in ethical manner Compliance and continuous monitoring should be set up by Banks to check the working of BCs on the field to keep a check on fraudulent cases. A centralised kiosk should be set up in rural areas where the people can get their problem resolved with respect to any Government scheme be it MNREGA, SSP or related to Aadhar card. CONCLUSION Thus we can conclude that in order to make the implementation of economic and social welfare of schemes effective, adoption of Direct Benefit Transfer scheme is the right pathway to minimise leakages, delivery delays, corruption and reduction in costs. The Direct Benefit Transfer scheme cannot be implemented effectively unless each member has been issued Aadhaar number and has a banking account to which Aadhaar card is linked. There are various challenges being faced in enrolment and issuance of Aadhar card such as inadequate infrastructure, lack of resources, untrained human resources as in enrolment team. Also, 40 percent of population is availing the banking services while rest doesn t have a bank account which is another roadblock. The RBI is making efforts to implement Financial Inclusion and one such initiative is Business Correspondent model which to has its own problems such as technical issues, fraudulent cases and unskilled BCs. But these can be overcome with time and by adopting more stringent processes and transparent monitoring processes. With the implementation of Direct Benefit Transfer scheme, there will be growth in rate of financial literacy as well we will be able to tap more people there at the bottom of pyramid and bring them under the umbrella of banking services. Thus Direct Benefit Transfer scheme can be leverage to increase Financial Inclusion. This is very crucial for long term financial stability of our economy. REFERENCES Arnold, Catherine., Conway Time., Greenslade Matthew., Cash transfers literature review. Retrieved from Banerjee, A and Duflo, E(2011). [I]Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty, United States of America, Public Affairs[/I] Page 35

10 Kenny, R. (2012). Banks at your doorstep: how good is the BC model. Message posted to Khan, Harun R. Issues and Challenges in Financial Inclusion: Policies, Partnerships, Processes & Products. Retrieved from February 20, Planning Commission, Government India. Handbook on Direct Benefit Transfer. Retrieved January 25, 2014 from Punj, Shweta. ( 2012). UPA s talk show. Business Today. Retrieved February 21, 2014 from Sharma, Sameer. (2012). Direct Cash Transfer scheme: India must learn from Latin America and Kenya. The Economic Times. Retrieved February 21, 2014 from Sinha, Shishir. (2012). Cash transfer scheme rolls out in 20 districts from today. Businessline. Retrieved February 26, 2014 from Cash transfers. (n.d). In wikepedia. Retrieved February 20, 2014, from National Portal of India. Rural. Retrieved February 15, 2014, from Page 36