Be cautious in shifting to DBT, RBI tells States

Acknowledging that problems have been experienced by three Union Territories (UTs) in the implementation of direct benefit transfer (DBT) for food subsidy, the Reserve Bank of India (RBI) has advised States that are planning to shift to cash transfer to be cautious while effecting the migration.

Problems highlighted by the RBI:

  1. The inadequacy of transfers to maintain pre-DBT consumption levels.
  2. Insufficiency of last-mile delivery mechanisms.
  3. A weak grievance redressal system.

Why is cash transfer better than the public distribution system (PDS)?

Cash transfer mode reduces the need for large physical movement of food grains.

Given the wide inter-State and intra-State variations in food consumption habits, the DBT provides “greater autonomy” to beneficiaries to choose their consumption basket, apart from enhancing dietary diversity.

It also reduces the leakage in the PDS, as the Central government has to absorb a huge food subsidy bill under the existing system of distribution of food grains in fulfillment of provisions of the National Food Security Act (NFSA).

Processes to be followed by States prior to DBT execution:

RBI has referred to certain pre-conditions mentioned in the Central government’s 2015 food subsidy rules. The pre-conditions include complete digitization and de-duplication of the beneficiary database and seeding of bank account details and Aadhaar numbers in the digitized database.

With the aim of reforming Government delivery system by re-engineering the existing process in welfare schemes for simpler and faster flow of information/funds and to ensure accurate targeting of the beneficiaries, de-duplication, and reduction of fraud Direct Benefit Transfer (DBT) was started on 1st January 2013.

DBT by leveraging the JAM (Jan Dhan, Aadhaar, and Mobiles) Trinity and the technological prowess offers to drastically improve the benefit delivery system in the country. The JAM Trinity will enable this novel system to transfer benefits in a leakage-proof, well targeted, cashless and timely manner.

The success of an ambitious and highly desirable initiative like DBT depends on a set of a few critical factors. For a heterogeneous and a large country like India, it becomes imperative that these critical success factors are ensured to achieve smooth rollout of a programme like DBT. The key success factors or enablers for an efficacious Implementation of DBT would include: JAM Trinity, Business Correspondents (BC) Infrastructure, payment bank and mobile money.

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