CSB IAS ACADEMY Mains Impact

MAINS Impact- 2025 22-04-2025

DIRECT BENEFIT TRANSFER

SYLLABUS:

GS 2 > Social Justice >> Welfare Schemes

REFERENCE NEWS:

Union Minister for Electronics and Information Technology Ashwini Vaishnaw has said that
the Direct Benefit Transfer (DBT) initiative of Prime Minister Narendra Modi has saved three
lakh 48 thousand crore rupees by reducing leakage. Quoting a policy paper titled A
Quantitative Assessment of India’s DBT System, Mr. Vaishnaw, in a social media post, said
that under this welfare delivery model, the coverage of beneficiaries has increased by 16
times. According to the policy paper, the country’s DBT system, implemented in 2013, has
redefined welfare delivery by enhancing transparency, curbing leakages, and ensuring
precise fund distribution.

DIRECT BENEFIT TRANSFER:

The Direct Benefit Transfer (DBT) scheme is a reform initiative launched by the Government
of India in 2013 with the goal of replacing subsidy and welfare delivery systems that were
riddled with leakages, duplication, and corruption.

Under DBT, subsidies and welfare funds are directly transferred into the bank accounts of
eligible beneficiaries, eliminating middlemen and ensuring efficient, transparent, and
targeted delivery.

Key Components of DBT:

o Aadhaar Integration: Ensures unique identification of beneficiaries. Prevents ghost

and duplicate accounts.
o Bank Account Linkage: Every beneficiary must have a bank account, preferably
Aadhaar-seeded. Promotes Jan Dhan Yojana as a financial inclusion enabler.

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o NPCI & PFMS Platforms: Transactions are processed via the Public Financial
Management System (PFMS). Payments routed through National Payments
Corporation of India (NPCI).

Categories of DBT Transfers:

o Cash Transfers: Cash is transferred directly to beneficiaries’ accounts for them to use
as they choose. LPG subsidy (PAHAL), PM-KISAN (₹6,000/year to farmers), MGNREGA
wage payments, PM Ujjwala Yojana cash for refills are some examples.
o In-Kind Transfers: Goods/subsidies are physically delivered, but beneficiaries are
authenticated via Aadhaar/IT systems. Food under PDS, Mid-Day Meals, Fertilizer
Subsidies
o Other Transfers (Benefit Calculations): Benefits like scholarships, pensions,
maternity benefits directly transferred to users.

BENEFITS OF DBT IN INDIA:

o Reduces Leakages and Corruption: Traditional systems were prone to middlemen,

ghost beneficiaries, and duplication. DBT, by linking Aadhaar, bank accounts, and
mobile numbers, ensures that only genuine beneficiaries receive benefits.
 Under the PAHAL (LPG subsidy) scheme, DBT eliminated 4 crore fake
connections and saved over ₹24,000 crore in subsidy (as per Ministry of
Petroleum, 2020).
o Ensures Timely and Transparent Payments: DBT enables real-time transfer of funds,
reducing delays and administrative bottlenecks. Payments can be tracked digitally,
creating transparency in disbursement.
 MGNREGA wages are now transferred directly to workers’ bank accounts
under DBT, reducing payment delays significantly and improving trust in the
scheme.
o Enhances Financial Inclusion: DBT is closely integrated with Jan Dhan Yojana,
encouraging every citizen to have a bank account. Promotes formal banking, savings,
and financial empowerment—especially for women and rural households.
 Over 50 crore Jan Dhan accounts opened, with more than 80% Aadhaar
seeded (as of 2023), enabling direct benefit access.
o Empowers Beneficiaries with Choice: Beneficiaries receive cash directly, allowing
them to make informed spending decisions. Reduces dependence on agents or local
power brokers.
 Under PM-KISAN, over 12 crore farmers receive ₹6,000 annually in three
installments directly into their accounts, allowing them flexibility to buy inputs
like seeds or fertilizers.
o Boosts Good Governance and Accountability: DBT creates a digital audit trail, which
helps in monitoring fund flow, detecting anomalies, holding officials accountable for
delays or discrepancies
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 The World Bank and IMF have acknowledged India’s DBT model as one of the
most efficient welfare delivery systems in the developing world.
o Reduces Government Expenditure: By preventing leakage and duplication, DBT saves
public money. Reduced costs of physical logistics (printing, couriering, middle layers).
 Union Minister for Electronics and Information Technology has said that the
Direct Benefit Transfer (DBT) initiative of Prime Minister Narendra Modi has
saved three lakh 48 thousand crore rupees by reducing leakage.
o Improves Service Delivery in Remote Areas: Even in tribal and rural regions,
beneficiaries can access funds through Bank Mitras, Aadhaar-enabled Payment
Systems (AePS) and mobile banking
 Ujjwala Yojana beneficiaries in remote villages get their LPG subsidy via DBT,
increasing LPG usage and reducing indoor pollution.
o Enables Targeted Subsidies and Rationalization: DBT helps the government to target
subsidies better by analyzing usage patterns and data. This leads to rationalisation of
subsidies and elimination of wastage.

CHALLENGES SURROUNDING DBT:

o Exclusion Errors Due to Aadhaar and Authentication Failures: Biometric mismatches,

incorrect Aadhaar linking, and data entry errors can prevent genuine beneficiaries
from receiving benefits.
 In Jharkhand, several cases of pension and PDS denial were reported due to
Aadhaar-based authentication failures (e.g., fingerprint mismatch of elderly
persons).
 The Right to Food Campaign has documented deaths allegedly linked to DBT
failures in food subsidy access.
o Inadequate Banking Infrastructure in Rural and Remote Areas: Many beneficiaries,
especially in tribal and remote regions, have limited access to bank branches,
functional ATMs, customer service points (CSPs)
 According to the RBI (2022), about 30,000 rural areas still lack formal banking
services.
 Bank Mitras or CSPs often do not function reliably, leading to failed
transactions.
o Delays in Fund Transfers and Payment Processing: Poor internet connectivity, server
issues, and bureaucratic delays in fund release can lead to late or missed payments.
 Under MGNREGA, despite DBT adoption, payment delays of 15–30 days are
common in states like Bihar and UP, affecting rural livelihoods.
o Lack of Awareness and Digital Literacy: Many beneficiaries do not understand how
DBT works, how to check balances, or how to resolve issues. Especially affects
women, elderly, and illiterate populations.

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 In several districts of Rajasthan and Madhya Pradesh, women under PM

Matru Vandana Yojana (maternity benefit) did not know whether they had
received funds.
o Over-Centralisation and Technical Rigidity: A one-size-fits-all model doesn’t work
well in diverse socio-economic conditions. Over-reliance on biometric authentication
and centralised databases ignores local realities and flexibility.
o Grievance Redressal Mechanism is Weak or Non-existent: Beneficiaries often don’t
know where to complain or face long delays in resolving issues. There is no single
unified platform for redressing DBT-related problems.
o Disruption of Existing Systems Without Readiness: In many places, cash transfers
replaced in-kind transfers (like PDS) without ensuring that markets were functional
or accessible.
 In Chandigarh and Puducherry, cash transfer pilots for food subsidies were
rolled back due to inflation and market shortages, as people couldn’t buy food
at fair prices.
o Gender Gaps in Access: Though DBT promotes financial inclusion, many women lack
control over their bank accounts or need permission to access funds.
 Studies by SEWA and World Bank show that over 40% of rural women depend
on male relatives to access or operate their bank accounts.

WAY FORWARD:

o Strengthen Last-Mile Delivery and Banking Infrastructure

 Deploy more Bank Mitras/BCs with biometric kits in underserved areas
 Ensure interoperability of banking systems across banks and regions
 Use mobile ATMs and micro-branches in hilly and tribal belts
 Airtel Money and M-Pesa (Kenya) show how mobile-based financial services
can improve last-mile inclusion.
o Adopt a Flexible, Multi-Modal Authentication System
 Allow OTP-based, IRIS-based, and offline Aadhaar options in addition to
biometrics
 Enable exception handling protocols for the elderly, disabled, or those with
failed authentication
 Justice Srikrishna Committee on Data Protection (2018) urged for multi-
factor authentication options in welfare delivery to avoid exclusion.
o Increase Awareness and Financial Literacy
 Launch targeted DBT literacy campaigns through Panchayats, SHGs, ASHAs,
and NGOs
 Simplify communication in local languages using visuals and community radio
 SEWA (Self-Employed Women’s Association) has trained thousands of rural
women to operate their bank accounts independently.

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o Strengthen Grievance Redressal Mechanisms

 Set up a dedicated, toll-free DBT helpline integrated with state systems
 Develop a single-window online DBT dashboard for status tracking and
complaints
 Ensure timely resolution protocols with SMS alerts for case updates
o Build Robust Real-Time Monitoring Systems
 Use AI-powered dashboards to flag anomalies (e.g., mass payment failures)
 Integrate real-time feedback loops from field officials and gram sabhas
 Conduct regular social audits for schemes like MGNREGA, PM-KISAN, PDS
o Reinforce Inclusion of Vulnerable Groups
 Prioritize women-headed households, disabled, migrants, and elderly in DBT
mapping
 Allow joint or nominee access for accounts where beneficiaries need
assistance
 Enable doorstep banking in remote tribal and conflict-affected areas
o Ensure Legal and Data Protection Safeguards
 Enact clear data protection protocols for beneficiary information
 Restrict data use only to purpose-specific government functions
 Implement consent architecture as recommended by the Data Empowerment
and Protection Architecture (DEPA) framework
o Avoid Premature Conversion from In-Kind to Cash Transfers
 Conduct impact assessments and local consultations before replacing food
grains or fertilizers with cash
 Ensure that market infrastructure and price regulation are in place where
such transitions happen

To make DBT a true tool of empowerment and inclusion, the focus must shift from just digital
efficiency to human dignity and accessibility. A resilient DBT ecosystem must accommodate
local realities, technological diversity, and social vulnerabilities. When supported by policy
flexibility and institutional accountability, DBT can become a global model of inclusive
governance and financial justice.

PRACTICE QUESTION:

Q. Direct Benefit Transfer (DBT) has significantly transformed welfare delivery in India, yet
challenges of exclusion and infrastructure gaps persist. Critically examine the impact of
DBT, and suggest a way forward to make it more inclusive and effective. (15 marks, 250
words)

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APPROACH:

Start by giving what is DBT in brief

Introduction with a data
Q. Direct Benefit Transfer
(DBT) has significantly
transformed welfare
delivery in India, yet Give the positive impacts and
challenges of exclusion challenges of DBT
and infrastructure gaps
persist. Critically examine Body
the impact of DBT, and
suggest a way forward to Give a way forward
make it more inclusive and
effective. (15 marks, 250
words)
Conclusion Conclude accordingly

MODEL ANSWER:

The Direct Benefit Transfer (DBT) scheme, launched in 2013, is a transformative welfare
reform aimed at transferring subsidies and benefits directly into the bank accounts of
beneficiaries. It ensures transparency, efficiency, and accountability, while reducing
corruption and leakage. As per the government, DBT has saved ₹3.48 lakh crore by reducing
fraud and duplication.

Impact of DBT:

Positive Outcomes:

 Reduction in Leakages: Under PAHAL (LPG subsidy), over 4 crore fake connections
were removed, saving ₹24,000 crore.

 Timely and Transparent Payments: MGNREGA wages, PM-KISAN transfers, and

scholarships are directly credited, enhancing trust and transparency.

 Financial Inclusion Boost: Over 50 crore Jan Dhan accounts have been opened,
enabling over 80% Aadhaar seeding.

 Empowerment of Beneficiaries: Schemes like PM-KISAN allow farmers to purchase

inputs independently, reducing middlemen reliance.

 Governance Efficiency: Recognised by the World Bank and IMF as a global best
practice in welfare delivery.

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Challenges:

 Exclusion Errors: Biometric mismatches, Aadhaar glitches (especially among elderly

and disabled), lead to denial of entitlements.

 Poor Infrastructure: RBI notes that 30,000 villages still lack formal banking access.

 Delays in Payments: MGNREGA payments face delays up to 30 days in states like Bihar
and UP.

 Low Awareness & Digital Literacy: Many women and illiterate beneficiaries are
unaware of DBT status or how to access it.

 Weak Grievance Redressal: No unified platform for resolving DBT-related issues

effectively.

Way Forward:

 Multi-modal authentication: Use IRIS, OTP, and exception-handling alongside

biometrics (as recommended by Justice Srikrishna Committee).

 Improve last-mile banking access: Deploy mobile ATMs, Bank Mitras, and micro-
branches in underserved areas.

 Strengthen grievance redressal: Set up DBT helplines, SMS alerts, and a unified
complaint portal.

 Promote financial literacy: Use SHGs, Panchayats, and NGOs like SEWA for training
and awareness.

 Ensure data protection: Implement DEPA framework and restrict data use for welfare
delivery only.

 Avoid abrupt transitions: Don't replace in-kind subsidies with cash without ensuring
local market readiness.

While DBT has undeniably improved welfare delivery by making it more transparent and
efficient, its true success lies in ensuring universal accessibility, minimal exclusion, and a
beneficiary-centric approach. With policy flexibility and strong accountability, DBT can
become a global model for inclusive and just governance.

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