4 min read.Updated: 03 Aug 2021, 01:48 AM ISTV. Anantha Nageswaran,Sumita Kale
Better incentives for agents and a mechanism for grievance redressal could improve performance
In general, over the last 18 months, while there have been very few silver linings in the macrocosm of the economy and the microcosm of families, one of them has been a demonstration of the effect of the JAM (Jan Dhan Yojana-Aadhaar-Mobile phone) trinity in keeping millions of Indians away from starvation. It is not much discussed, but the success of the Direct Benefits Transfer (DBT) Mission is indisputable. One of the memorable recollections one associates with former prime minister Rajiv Gandhi is his candid admission that the ordinary citizen received only 15 paise of every rupee that the government tried transferring to her. If he were alive today, he would perhaps revise that number upwards substantially. Between benefits transferred in cash and kind, government welfare transfers amounted to ₹5.52 trillion in 2020-21, compared with a mere ₹7,367 crore in 2013-14.
Notwithstanding the manifest achievements of the DBT Mission during the pandemic period, we offer a limited set of suggestions in this column to enhance its efficacy and efficiency.
The DBT process has many layers of authorities involved, but the point of contact with the beneficiary for cash withdrawal is the most critical. The massive welfare payouts started during the lockdown period in March 2020 have reached beneficiaries in rural areas through these agents. However, surveys reveal that a quarter of these agents are operating with losses. With low revenues, service quality tends to be given a pass. But agent viability and service quality are central to financial inclusion. The banking agent network is the only touchpoint for people living in locations that are inaccessible and/or not well-served by public transport. For people in remote places, they are the entry portal to the world of deposits, savings and later financial planning.
A long-standing issue has been the inadequate compensation paid by the government to the banking channel for DBTs. As an Indicus Policy Brief of March 2018 had suggested, an institutional mechanism that updates the costing exercise regularly is required. For instance, commission charges for agents should be differentiated specific to the location. They should be higher for rural areas where economic activity is low, for example. Further, as we had written earlier in these pages (‘How India Could Speed Up the Financial Inclusion of Women’, 8 March 2021), enrolling and having more women as banking business correspondents will be a big part of that success story.
As it happens, it is also vital to the continued efficacy of the DBT Mission. Ensuring that monies are properly received and credited into people’s accounts and the facilitation of easy withdrawals of the same are critical to the smoothening of income and consumption among recipient households and also their accumulation of savings over time.
The issue of agent viability and service quality is not a direct responsibility of the DBT Mission. It falls under the department of financial services in the ministry of finance. However, given that it is mission-critical, we have included it here.
A related minor issue is that different payment mechanisms are currently in use between the Union and state governments. Whereas the Union government uses the NPCI channel, states use NEFT and RTGS. This makes it difficult for banks to receive DBT commissions. Further, these transactions are not reported in the overall DBT count, which results in an understatement of the overall impact of DBT transfers.
When it comes to beneficiary identification and enrolment, the DBT Mission has already initiated the process of allowing eligible beneficiaries to apply for available schemes directly. This will improve the targeting of benefits. However, it is important for governments (central and state) to keep the eligibility criteria simple for benefit schemes. Also, the process of enrolment should be simple and easily accessible. For instance, the enrolment of beneficiaries through the UMANG app based on eligibility parameters can also be done through banking correspondents and not limited only to common services centres, as is the case currently.
Many of the operational challenges that DBT faces can be mitigated by putting an effective customer grievance redressal mechanism in place. Grievance redressal is important for the long-term success of DBT. Yet, it has received little attention so far, as most stakeholders are focused on proximate priorities. A proper customer grievance redressal mechanism needs to be conceptualized. A systematic process for it must be mapped out for the multiple layers of authorities involved in the DBT programme’s last-mile delivery.
India has begun well—even spectacularly, we dare say—with targeted subsidy transfers in a country with such a vast dispersal of people across its land mass. But this is not a project with a well-defined beginning and end point. It’s continuous. Ensuring that the DBT Mission delivers on the purpose for which it was set up will require instituting processes and mechanisms that anticipate and identify glitches and rectifying them in time.
V. Anantha Nageswaran & Sumita Kale are, respectively, member of the Economic Advisory Council to the Prime Minister and advisor, Indicus Centre for Financial Inclusion. These are the authors’ personal views.
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