ET Bureau Feb 25, 2013, 04.00AM IST
The Direct Benefits Transfer (DBT) scheme commenced with the initial rollout in 20 districts covering seven scholarship schemes. Another 23 districts will be covered by March this year. The intention is to link all government benefits to Aadhaar-based identification of beneficiaries and to channelise the cash benefits through Aadhaar-enabled bank accounts.
Irrespective of the merits of translating some benefits delivered in kind like in PDS into their cash-equivalent, for the DBT scheme of routing cash benefits through Aadhaar-enabled bank accounts to succeed, some things are essential prerequisites: an electronic database of beneficiaries to be maintained on a continuing and regular basis by the concerned line departments and seeding of the database of beneficiaries with Aadhaar numbers.
Since there is no way to electronically integrate the Aadhaar numbers into the existing database of beneficiaries of the concerned line departments, there is always a chance of digitisation error while seeding the Aadhaar numbers.
Any digitisation error in seeding the 12-digit Aadhaar number in the database of beneficiaries of the line departments will lead to denial of benefits. Aadhaar identification numbers play no role in the right selection of beneficiaries, other than ensuring that the benefits do not flow more than once to the same person. The departments will continue to be responsible to ensure that the ineligible are not included or the eligible are not excluded from any programme of benefits transfer.
Assuming the list of beneficiaries seeded with Aadhaar numbers as given, the most important requirement for DBT to succeed through Aadhaar-enabled bank accounts is to ensure that there is adequate access to banking infrastructure in the unbanked areas to serve the beneficiaries. Without accessibility, even if the benefits are credited into bank accounts, the beneficiary will not be able to withdraw the cash balance from his account at his convenience as a normal customer of the bank.
The scholarship schemes rolled out in a few districts do not test the adaptability of DBT scheme on actual mass scale. To carry out Aadhaar-enabled payments, the DBT scheme envisages three distinct steps to be carried out: first, to authenticate the beneficiary using the 12-digit Aadhaar number and the fingerprint biometrics captured on the spot and transmitted over mobile phone connection and matching with the biometrics stored in the Aadhaar server; second, after successful authentication from the Aadhaar server, to retrieve the name of bank and account number of the beneficiary from the National Payments Corporation of India (NPCI) server; and third, to linkwith the bank server for customerend transaction.
The linkage with the bank server for customer-end transaction occurs after biometricsbased authentication at the Aadhaar-end server and retrieval of the bank name and account number from the NPCI server. Though this may be technologically feasible, but its smooth operationalisation on a mass scale in the rural unbanked areas of the country where mobile connectivity is poor is in doubt.
In this respect, the experience of Haryana is relevant. The Social Justice and Empowerment Department of the state administers various social security benefit schemes for senior citizens, widows and destitutes, persons with disability and scholarship schemes. The direct benefits transfer to the bank account was implemented for five monthly cycles in 2011, in which almost two million bank accounts were created and bank account numbers seeded into a database of beneficiaries maintained online.
The bank accounts were operated using smart cards at the micro ATM terminals of the business correspondents (BC) employed by the bank and authenticated by fingerprint biometrics. In the process of creating bank accounts, the department benefited by weeding out one lakh bogus beneficiaries, who were either duplicates or ineligible. A total of Rs 600 crore was routed into two million bank accounts for five cycles in 2011.
One micro ATM terminal deployed by a BC could carry out 50 customerend transactions on an average during the course of a day, each transaction taking 5-6 minutes on average. To enable a customer-end transaction, the customer was first authenticated offline using the fingerprint biometrics stored in the smart card. After offline authentication of the customer, the connection with the bank server was used for carry-ing out customer-end transaction.
The offline biometrics-based authentication of the customer and the single communication with the bank server for carrying out customer-end transactions took 5-6 minutes on average. The experiment in Haryana had to be suspended because the level of deployment of micro ATM terminals by banks was grossly inadequate. For the BC model to succeed, at least one customer-end transaction must be enabled each month as per a predetermined, fixed schedule to allow the customer to withdraw cash from his bank account.
Two million bank accounts and one customer-end transaction required the deployment of 40,000 terminaldays per month. Two customer-end transactions a month require double this number, or 80,000 terminaldays per month. Against this, the actual deployment was 7,000-8,000 terminal-days a month, leading to gross non-accessibility of banking services for months, even though government money stood transferred into the bank account of the beneficiary.
Since three communications are required for each customer-end transaction in Aadhaar-enabled payment system, one each with the servers of Aadhaar, NPCI and the bank, the transaction would take more time than the Haryana model, particularly where connectivity is poor in unbanked areas.
This entails even greater deployment of banking infrastructure for the DBT scheme to succeed. Another problem encountered was fingerprint-based biometrics authentication, where there were 10-15% false positive, or Type-I, errors.
That is, the customer was wrongly denied access to his bank account on wrong rejection based on fingerprint mismatch, i.e., the fingerprints of the account holder did not match with those stored on the smart card. The denial of service in 10-15% cases on the basis of fingerprint mismatch led to tremendous customer dissatisfaction about the quality of service of the BCs deployed by the banks. But in the Haryana model, this mismatch was easily remediable on the spot by recapturing the fingerprints.
However, a fingerprint mismatch in Aadhaar-enabled payments can only be remedied after the recapture and storage of fresh fingerprint biometrics on the Aadhaar server. The delivery of cash benefits through Aadhaar-linked bank accounts is desirable, provided adequate banking infrastructure is in place. Substitution of normal branch or ATM banking by "low-cost" BC model may not be the panacea as thought.
A regulatory mandate of a lowcost bank branch for every 1,000-2,000 customers providing elementary customer-end transactions in unbanked areas and making it mandatory for all licensed banks seems to be the only feasible alternative for DBT scheme to succeed. The initial establishmentof lowcost branches in unbanked areas can be financed from a specially-created Financial Inclusion Infrastructure Fund, by imposing a Tobin tax type of levy on all financial transactions above a certain threshold level.
All existing bank accounts can be Aadhaar-enabled by seeding them with Aadhaar numbers. There is no easy short cut to success. Adopting hard steps only would ensure that the DBT scheme is a real game-changer.
(The author is an IAS officer. Views are personal)
