Cash transfers to citizens through the Direct Benefit Transfer (DBT) system is one of the most prominent developments in India’s social protection policy landscape. Under this system, citizens enrolled under various welfare schemes, receive monetary benefits from the government, directly into their bank accounts. DBT architecture has been designed to reduce leakages in welfare delivery. E.g., PAHAL, PM-KISAN.
However, these DBT schemes have some limitations:
- Exclusion errors: Cumbersome documentation requirements and opaque/delayed application processing often result in exclusion of eligible beneficiaries.
- Payment failures: Spelling errors in Aadhaar details, incorrect seeding of citizen’s Aadhaar and bank account, pending KYC and frozen/blocked bank accounts, network failures, biometric authentication failures, point-of-sale (PoS) device malfunctioning are some of the most prominent reasons for payment failures in DBT.
- Misuse of money: Provision of cash might result in its misuse by the beneficiaries and may not serve the intended purpose.
- Market vulnerabilities: Replacement of welfare subsidies by DBT cash payments might subject the beneficiary to market vulnerabilities. E.g., DBT of LPG subsidy under PAHAL is not compensating the increase in gas prices in the market.
Thus, it is important to overcome these limitations to ensure the intended purpose of DBT schemes is realised.