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Direct Benefit Transfer (DBT)

Direct Benefit Transfer (DBT) was the program launched by the Government of India in 2013, during the Congress led UPA government’s regime. This program aims to transfer subsidies directly to the people through their bank accounts. Read this article to know more about the scheme and its benefits.


It was our former Prime Minister Late Sri Rajiv Gandhi who mentioned in 1985 that for every rupee spent on social welfare schemes, only 17 paise reaches the beneficiary. The Plan panel study on PDS conducted during 2009 found that only 16 paise out of a rupee reaches the poor and needy.


If you closely follow the way the government schemes work, you will also notice that enormous amount is being looted by middlemen, commission agents and others. What reaches the actual beneficiary is a pittance.


In order to overcome this cheating menace, the decision was taken by the National Committee on Direct Cash Transfer held by former PM Manmohan Singh to roll out Direct Benefit Transfer (DBT) scheme from January 2013. As I mentioned above, the purpose of Direct Benefits Transfer is to ensure that benefits go to individual’s bank accounts electronically, minimizing tiers involved in fund flow thereby reducing delay in payment, ensuring accurate targeting of the beneficiary and curbing pilferage and duplication.


Increased penetration

Since 2013, the transactions under DBT scheme are progressively expanding across the country. After NDA Government led by Mr. Modi came into power, DBT scheme has gained momentum.


Today, almost all transactions (including scholarships schemes to students) to individual beneficiaries under any beneficiary oriented schemes have been brought on DBT platform.


The two main components of DBT are (a) Aadhaar Number (b) Bank account. Today, as per the information provided by the Minister to the Parliament in April 2015, over 82 Crores of people have got Aadhaar number! Similarly, through Jan-dhanyojana, over 12 crores of bank accounts have been opened by the people of this country.


So, the combination of aadhaar linked bank accounts will ensure that the subsidies reach the beneficiaries directly.


How it works?

Let me explain one such scheme for the better understanding – Direct Benefits Transfer for LPG (DBTL). It is popularly called as ‘PAHAL’

  • Consumers will need a bank account to join the scheme and receive LPG subsidy
  • Consumers will also get one time permanent advance in their bank account prior to buying the first market priced LPG cylinder
  • Consumers will receive subsidy in their bank account as per their entitlement of subsidized cylinders


To sum up, the consumers have to pay at market rates and get the subsidy to their bank account. This way, the consumers are not at the mercy of the shopkeepers (PDS for rice, wheat, kerosene, etc.). Similarly, the beneficiaries of social welfare schemes like pension, compensation, etc., will get the benefits directly credited to their bank accounts.


DBT not only helps the beneficiaries but also avoids duplication of payment, if any. The payment is linked to aaddhar number and bank account.


DBT is done through a robust system called Central Plan Scheme Monitoring System (CPSMS). All payments are made through this system. As a last mile connectivity, DBT is delivered through 250,000 post office branches and 100,000 ATMs in the country. Added to this will be approximately 1 million Aadhaar enabled ‘micro-ATMs’, and eventually this platform aims to incorporate the over 750 million mobile phone devices to unleash its transformational potential.


The entire system is run on an ‘Aadhaar Payments Bridge’ (APB) and ‘Aadhaar-enabled Payment Systems’ (AEPS), which are now operational and can handle millions of transactions on a daily basis. The APB and AEPS provide a fully interoperable system—it ‘talks’ to all banks, and it doesn’t matter if the banks of the payer, payee and business correspondent are different.


I am very delighted to know about this scheme for two reasons. One, this is a game changer scheme. It helps to eradicate corruption and poverty at one stroke. Secondly, the way present government is taking the scheme launched by the previous government. Fortunately, no politics has spoiled the spirit of the scheme. Thus, DBT will help ‘real and poor’ people of this country.


Thought for the day

Don’t ignore someone’s problem. What may be nothing to you may be everything to them

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About CA Prasad Chartered Accountant

CA Prasad Chartered Accountant
CA Prasad is a practicing Chartered Accountant and partner in Bangalore -based CA Firm. For further information or query, please email it to [email protected]