In India, the direct benefit transfer (DBT) system has gained enormous acceptance as a method of delivering welfare to the most deserving. It has been the main instrument of governments’ social protection response to the COVID-19 pandemic.
However, despite the system’s attractiveness and simplicity, DBT beneficiaries face several problems in accessing their benefits.
The Dvara-CMIE Survey on Access to Cash and Coping Mechanisms during COVID-19 included 80,000 households across the country between January and July 2020. The results, which will soon be published, are sobering: It found that almost 40% of surveyed households that attempted to withdraw cash faced issues while doing so.
Under DBT, funds released from the government treasury are directly transferred into the targeted individual’s bank account, mostly via the National Payments Corporation of India (NPCI)’s National Automated Clearing House – Aadhaar Payment Bridge System (NACH-APBS). Such leveraging of the banking apparatus has allowed governments to move away from the manual distribution of cash using bureaucratic procedures, to banking channels that are considered more efficient to administer. However, the DBT process has not been smooth and banking-related problems still confront the poor.
One such set of problems pertains to the last mile of banking services and the difficulties the DBT beneficiaries face while accessing their money in banks. Dvara Research’s fieldwork, spanning multiple states, has revealed a detailed taxonomy of challenges that households face while withdrawing their DBT entitlements from cash-out points (COPs).
These challenges can be clubbed under three broad heads.
The first category pertains to the availability of and accessibility to a COP, such as travelling long distances to withdraw cash, erratic functioning of COPs. The second includes issues that emerge during the cash-out transaction itself, such as network failures, biometric authentication failures, PoS device malfunctioning and long queues. The last category includes issues that indicate some form of non-compliance on the part of the banking officials/agents interacting with the DBT beneficiaries. Instances of petty corruption and fraud fall under this category.
The most prominent issues documented through the Dvara-CMIE survey (2020) were transaction failures (loosely defined as instances in which the respondent was unable to finish the transaction and had to come back empty-handed), overcrowding, and long queues. The last two of these indicate the lack of capacity on the part of COPs to handle the high footfall due to the disbursement of ad-hoc cash transfers under the Pradhan Mantri Garib Kalyan Yojana starting April 2020. Overcrowding and long queues also point to poor COP density, i.e., the number of COPs available vis-à-vis the population of the area being serviced.
The same categories of issues continued to ail the system well after the first year of the pandemic. The Dvara-Haqdarshak Study on Exclusion in Government to Person Payments, conducted between the months of March and December 2021, covered approximately 1,300 respondents in rural and semi-urban blocks of Assam, Andhra Pradesh, and Chhattisgarh. About 65% of these respondents reported facing one or more issues while attempting to cash out their DBT(s). The most salient among these were distant COPs, network errors, biometric authentication failures, long queues/overcrowding at the COP, and lastly, erratic availability of the COP. It is also interesting to note that around 50% of the total number of respondents reported using Business Correspondents (BCs) as their COP. However, even in this case, about 68 per cent reported having faced at least one challenge.
For the beneficiary, the process of cash withdrawal has become a hit-or-miss exercise, requiring multiple visits to different COPs (for instance, respondents experiencing biometric authentication failures at a Banking Correspondent were forced to approach a bank branch and withdraw using a passbook) resulting in additional time being spent and costs incurred, often to no avail. In many cases, these costs take the form of foregone wages, exacerbating the already precarious condition of the low-income, informal sector workers who typically form the target base for DBTs. Furthermore, the cumbersomeness of existing grievance redress mechanisms, coupled with the lack of clarity in the assignment of accountability at the last mile, makes it even more difficult for DBT beneficiaries to navigate the banking ecosystem.
The last mile continues to be fraught with challenges despite a slew of initiatives (introduction of branchless banking, unique IDs, digitisation of cash transfers, etc.) taken in the last few years. These steps are meant to preclude precisely the kinds of problems that our work has uncovered. We cannot, therefore, yet reach an unequivocally favourable verdict on India’s experience of DBT transfers. The introduction of DBT has surely enhanced administrative efficiency but it is yet to manifest efficiency gains (of time and costs) for the last-mile beneficiary.
Such inadequacies in the cash-out infrastructure must be immediately addressed if we are to harvest the full potential of technology-based transfers of welfare.
Indradeep Ghosh and Aarushi Gupta are researchers associated with Dvara Research. Siraj Hussain is a former Union agriculture secretary and currently a visiting senior fellow, the Indian Council for Research on International Economic Relations (ICRIER).