FICCI, Indian Banks’ Association and the India Office of Konrad-Adenauer-Stiftung (KAS) jointly organized a virtual roundtable on the subject of delivery of subsidies / welfare benefits to citizens through banks leveraging technology.
During the recent past, the governments across the countries have started deploying technology to offer public services in a more efficient and effective manner. The implementation of such projects in emerging economies such as India requires an altogether different approach as the challenge is to offer public services to a population of above 1.4 billion including those who may be less digitally literate. Technology solutions implemented in developed countries such as Germany may not be simply replicated in a developing country like India, which has its own set of challenges. For example, in case of the delivery of subsidies / welfare benefits, in a country like Germany most of the adults would have a bank account. However, in a country like India the biggest challenge to be addressed is to provide access to a bank account to all adults.
Banks play a vital role in supporting the Direct Benefits Transfer (DBT) program of the government and there is a need to understand delivery models being followed in various countries and how these compare and the possibility of learning from each other.
Following are the key takeaways:
- In Germany, promotional banks play a major role in the banking system. In Germany there are promotional banks operating at federal and federal state levels, which have a special structure and a clear statutory mission backed by corresponding state guarantees. This means that the tasks and business activities of the promotional banks differ significantly from the activities of commercial banks.
- Promotional banks played a crucial role during the Covid-19 pandemic in creating financial stability in Germany by providing credit to various socio-economic groups and preventing a liquidity crisis.
- In India, the Direct Benefit Transfer (DBT) is a key component of the Digital India initiative launched by the government to digitally empower society and foster a knowledge-based economy by ensuring digital access-inclusion-empowerment to bridge digital divides.
- The Direct Benefit Transfer (DBT) initiative of the Government of India was launched in 2013 and currently covers 91 % of the Indian population through its Aadhar unique identification number to make government schemes, subsidy amounts and money directly transferable to citizens.
- DBT currently delivers financial benefits of 310 central sponsored schemes from 53 ministries and 724 million citizens are availing services through DBT.
- DBT relies on the Office of the Controller General of Accounts (CAG) and Central Plans Scheme Monitoring Team (CPS MS) to digitize and manage the beneficiary list.
- The unique identification number of citizens provided through the Aadhar number plays a critical technological support role in the identification of beneficiaries and also in the removal of duplicate account of beneficiaries.
- The National Payment Corporation of India (NPCI) also plays a critical role in the last mile banking technology for banks by delivering funds directly to individuals’ accounts by using the ‘Aadhar mapper’ as a payment bridge for the respective account credit.
- Affordable zero balance bank accounts provided through the Pradhan Mantri Jan Dhan Yojana (PMJDY) Initiative (Jan-Dhan) launched in 2014 by PM Narendra Modi enable fund transfers to every citizen including very poor sections who cannot afford to open and manage bank accounts.
- Mobile phone banking on Jan-Dhan accounts enables people to access and manage funds, subsidies and government policy benefits. The Aadhar Enabled Payment System (AEPS) enables people in far areas with no accessible bank branch to receive funds from any account using the Aadhar ID number and biometric information. In this manner, money is adjusted across accounts by AEPS.
