Direct Bank Transfers will Stop Leakages in Welfare Benefits

Wednesday, January 21, 2015
The Guinness Book of World Records has recognised the scale of the scheme (file photo: Mint)

The government will transfer welfare benefits worth at least Rs. 33,000 crore ($5.35 billion) directly into the banks accounts of beneficiaries in the next six months, Financial Services Secretary Hasmukh Adhia told reporters. This is aimed at plugging the leakage of welfare benefits by cutting out frauds who siphon crores of rupees from welfare schemes. This is expected to reduce the troublesome fiscal deficit over the medium term.

The framework has been provided by the ambitious Pradhan Mantri Jan Dhan Yojana, under which 115 million bank accounts have been opened, covering 99.74 percent of households.

"Most of India today is included in the banking system," Finance Minister Arun Jaitley said at a press conference on Tuesday, adding that more than Rs 9,000 crore ($1.46 billion) has so far been deposited in the Jan Dhan accounts.

Prime Minister Narendra Modi announced the financial inclusion scheme in his first Independence Day speech last August. It was launched with a target to open bank accounts for 75 million people by January 26, 2015 – a target that was later increased to 100 million accounts.

The Guinness Book of World Records has reportedly recognised the scale of the scheme.

"Most bank accounts opened in one week as part of the Financial Inclusion Campaign is 18,096,130 and was achieved by the Department of Financial Services, Government of India from August 23 to 29, 2014," the Guinness Book noted in its citation.

Jaitley said that the exclusion of a large number of people from the banking network had been inhibiting growth.

"Financial Inclusion is one of the top most priorities of the government. PMJDY is the biggest financial inclusion initiative in the world," he pointed out, adding that 60 percent of the accounts opened are in rural areas.

The finance minister said the government would use these bank accounts to pass on benefits to individuals under its various social security schemes.

Describing this as "a game changer for the economy", Jaitley said the accounts would provide the platform for Direct Benefits Transfer (DBT) and help in plugging leakages in subsidies.

The bank accounts are now being used for the payment of wages under the MNREGA scheme as well as the LPG subsidy, with more than Rs 33,000 crore ($5.35 billion) to be routed through them annually.

State governments are also being requested to transfer cash directly to the bank accounts of beneficiaries to cut out layers in the delivery process.

- Karan Singh

To Learn More:

India to directly transfer $5.4 billion in welfare benefits in six months (Reuters)

11.5 crore Jan Dhan accounts opened; most of India is banked: FM (PTI)

Widen direct transfer benefits: Bimal Jalan on govt spend (by Bimal Jalan, CNBC-TV18)

Register now for LPG direct subsidy transfer (by Somit Sen, The Times of India)

DBT for LPG world's largest direct benefit transfer scheme (PTI)


ameliaallane 4 years ago
Good write up Masha - following you guys on Twitter as well.

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