Cash transfers to citizens through the Direct Benefit Transfer (DBT) system is one of the most prominent developments in India's social protection policy landscape. Those who enroll into the various welfare schemes receive monetary benefits from the government that are paid directly into their bank accounts. The DBT aims to eliminate ghost beneficiaries and reduce 'leakages' in welfare delivery.

However, a recent study revealed that 63 per cent of all respondent beneficiaries of these DBT welfare schemes faced problems withdrawing cash. Half of the respondents said that the cash withdrawing points were far away, while 37 per cent reported network errors or failures. Twenty one per cent reported biometric authentication failures.

The study titled State of Exclusion released today, June 3, is a brief of various research studies conducted by Chennai-based Dvara Research, in collaboration with Mumbai-based Centre for Monitoring Indian Economy (CMIE), on the last-mile delivery of social protection schemes. These schemes include the Mahatma Gandhi National Rural Employment Guarantee Act (for daily wagers), Pradhan Mantri Kisan Samman Nidhi (for farmers), Pradhan Mantri Matru Vandana Yojana and Janani Suraksha Yojana (for women).

As part of the Dvara-CMIE survey, nearly 80,000 households across several states, including Maharashtra, Uttar Pradesh, Bihar, Jharkhand, Haryana, Himachal Pradesh, Madhya Pradesh, Uttarakhand, Andhra Pradesh, and Tamil Nadu, were interviewed between January and July in 2020.

The study analysed every stage of the delivery pipeline of Direct Benefit Transfers — starting from enrollment stage all the way to the cash withdrawal.

Spelling errors in Aadhaar details, pending KYC, frozen or inactive bank accounts, mismatch in Aadhaar and Bank account details were some of the issues that resulted in payment disruptions, said the study.

Cash withdrawal cumbersome in rural areas

Cash withdrawal by the beneficiary is the last stage in the delivery of DBT, involving cash-out infrastructures like bank branches, ATMs and Business Correspondents (BC). Modalities used to withdraw money include: passbook, biometrics, debit card and/or identity verification through Aadhaar.

The Dvara-CMIE study showed that around 39 per cent of the households that attempted to withdraw cash in the period January-July 2020, faced accessibility, overcrowding and transaction failures.

'Time-consuming' and staff not being helpful or demanding bribes were also challenges.

The problems faced by the rural population were higher than the urban households when it came to cash withdrawal.

In the pre-COVID period between January-March 2020, about 47 per cent of rural households and about 32 per cent of urban households reported that the process of cash withdrawal was too time-consuming.

For rural households, transaction failures (40 per cent) and overcrowding (28 per cent) were key problems. Issues of inaccessibility or unavailability (nine per cent) and staff-related issues (eight per cent) have been reported by far fewer households comparatively.

For 58 per cent of urban households that faced cash-out problems, the key concern was transaction failure. This is followed by cash-out being too time-consuming (32 per cent), overcrowding/unsafe (22 per cent), inaccessibility or unavailability (15 per cent), and lastly, staff-related issues (eight per cent).

In the post COVID-period of April-July the same year, 49 per cent of rural households and 51 per cent of urban households reported cash-out issues citing overcrowding as a problem. This was followed by time-consuming (50 per cent in rural, 39 per cent in urban), transaction failures (23 per cent in rural, 37.5 per cent in urban), unavailability/inaccessibility (12 per cent for both rural and urban), and lastly, staff-related issues (about 11 per cent in rural and six per cent in urban).

Policy recommendations

• Increasing the number of cash-out points in underbanked villages with immediate effect. This process of activation of banking points must be expedited by making data on the Find My Bank portal public, which would enable both private and public service providers such as banks and BC Kiosks/CSCs to update verifiable numbers of cash-out points in real-time as well as help them identify districts and villages that are under-banked, ensuring optimisation of catchment areas under each bank. Reserve Bank of India's recent notification with regard to geo-tagging of payment points is a welcome move.
  
• The above infrastructural changes must be accompanied by revision of current incentive structures of individual banking agents. The RBI must create additional incentives for agents who provide services in underbanked areas, which usually have higher concentrations of recipients of social protection entitlements.
• Establishment of clear accountability rules in case of embezzlement of welfare transfers by banking intermediaries. Any such rule should entail compensation of the beneficiary by the liable entity.