Cash transfer—are banks ready?
Moving to the cash transfer system will be the biggest challenge for the Indian banking sector in recent history
From 1 January, the subsidy amount for 29 of 42 welfare schemes of Indian government will go directly into the bank accounts of the beneficiaries in 51 districts across 16 states. The electronic cash transfers will be based on the 12-digit unique identification number or Aadhaar, a proof of identity and address anywhere in the country. The districts being covered in the first phase include five each in Andhra Pradesh and Maharashtra; four each in Himachal Pradesh and Jharkhand; three each in Karnataka, Madhya Pradesh, Rajasthan and Tripura; and two each in Haryana, Kerala and Sikkim. The basis for selecting these districts is 80% coverage of the Aadhaar scheme. The second roll-out at more districts will be launched in April. The plan is to cover the entire country by the end of next year. If implemented well, the scheme will enhance efficiency of welfare schemes as the government will be able to reach out to identified beneficiaries and plug leakages.