Operational glitches in cash transfers

The Government’s decision to implement direct cash transfer (DCT) from January 1 may sound appealing. But it will be a major challenge to banks — which play a key role in disbursing these amounts — as not much time is left with them to prepare for it.

As one of the bankers put it, banks mark the culmination of the entire process, though other line departments and agencies are involved in direct cash transfer. Bankers are the last-mile connectivity to a customer.

Coordination issues

The Government, which began the financial inclusion programme in the country a few years ago, implemented it in phases based on the population in a village (above 2,000 people in the first phase, and from 1,600-2,000 in the second phase).

However, it cannot implement DCT in such a manner because of the agencies and schemes involved.

Once it is said that a district is fully ready for direct cash transfer, it cannot make any distinction on the basis of population group.

Banks have to open accounts for all the people in that district. For example: in a family of five people, the head of the family may get LPG subsidy through this programme, his daughter may get the scholarship from the government scheme under this, his wife may a beneficiary under the MGNREGA and his parents may get old-age pension.

In that case, all the family members will have to get bank accounts. There should be coordination between banks and the line departments involved in the above matters.

The Government proposes to disburse cash in 34 schemes under DCT.

Wherever a bank branch is not available, bankers have to ensure that there is a business correspondent within a 2-km radius and a branch within a 5-km radius.

Aadhaar factor

The Aadhaar number is not taken in several accounts in the proposed districts. Even if one considers that more than 90 per cent of enrolment for DCT is over in Mysore and Tumkur, the number of Aadhaar cards issued is less, say some bankers.

A person who is yet to get the Aadhaar number gets a 28-character acknowledgement number (enrolment ID). But bankers say that banks can absorb only 12 characters.

There are other challenges too. In a village of 300 people, only 100 may have taken Aadhaar and shared it with the bank. When a customer opened the account there was no Aadhar number with him/her. Now he/she might be having it, but would not have shared it with the banks.

To bring back those who have opened accounts with the bank and not given the Aadhar number will be a challenge.

Another practical problem with regard to DCT would be that customers will have to make many payments upfront, although the subsidy money will be credited later into their accounts.

Some bankers feel that all that should happen in tandem, as some customers expect to get their subsidy credited immediately.

The Government would have done better if it had tried some more pilots to test the strategies in the implementation of DCT.

Some debate or workshops involving all the stakeholders would have helped in coming out with correct modalities on this, rather than implementing it in a hurry.

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