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Direct benefit transfer scheme and how it can assist the present system

Updated: Sep 3, 2022


Sakshi Shairwal

Anant Aggarwal

What is DBT Scheme?

DBT (Direct Benefit Transfer) is the scheme of transferring the subsidy amount or such other transfers directly into the account of beneficiaries instead of handing it to government offices to give it to the beneficiaries. Direct Benefit Transfer is when the government pays directly to the beneficiary and does not receive any returns. Scholarships and subsidies are examples of such transfers.

The aim of this scheme is to bring accountability and transparency to the system. Beneficiaries get the subsidies/scholarships in the bank account linked with their Aadhar card; hence Aadhar plays an important role here.

The whole idea of this scheme is to remove any middlemen that may hinder the process of helping the needy.

Journey so far

DBT has come a long way since its birth by the Government of India on 1 January 2013 to change the mechanism of transferring cash subsidies and benefits. The hope behind this scheme was that crediting the subsidies into the bank accounts would substantially reduce leakages, and associated delays, related to the flow of funds in a hierarchal chain of administrative offices till it reaches the end beneficiary. Central Plan Scheme Monitoring System (CPSMS), the earlier version of the Public Financial Management System (PFMS), of the Office of Controller General of Accounts, was chosen to act as the common platform for routing of the Direct Benefit Transfer. CPSMS was used for the preparation of the beneficiary list, digitally signing the same, and processing of payments in the bank accounts of the beneficiary using the Aadhar Payment Bridge. Primary components in the implementation of DBT schemes include Beneficiary Account Validation System, payment and reconciliation platform integrated with RBI, NPCI, Public & Private Sector Banks, Regional Rural Banks, Cooperative Banks, etc.

The Process

On the selection of valid beneficiaries, the Scheme IT systems the payment are initiated by sending payment instructions to PFMS which in turn is routed to banks after necessary validation of beneficiaries. PFMS evolved as a robust payment and reconciliation platform integrated with 500+ banks for verification of the bank account of the beneficiary and for verification of Aadhar seeding of bank accounts of the beneficiary, with NPCI. This pre-validation of the beneficiary account/Aadhar-linked bank drastically brought down the failure of the payments as well as the delays in the amount being available in the hands of the beneficiary.

Core Banking Solutions: Banks being the last mile delivery channels, play a very critical role in the DBT process flow. As all account-based payments are routed through the core banking channels, processing efficiency at this stage coupled with the flow of reverse MIS imparted the desired momentum to the DBT programme.

Case law

Akash Goel v. RBI & Ors.- Recently, a petition was filed seeking the court’s direction to declare and prohibit the use of active Pradhan Mantri Jan Dhan Yojna (PMJDY) accounts as the sole criterion for identification of poor persons for applying the DBT scheme, it also included cash transfers under Prime Minister Garib Kalyan Yojana as being violative of Articles 14 and 21 of the Constitution of India for being arbitrary, discriminatory and exclusionary. The plea also sought the court’s directions to the Respondents to mandatorily create SOP for ‘exceptions dealing mechanism’ for cash transfers under Prime Minister Garib Kalyan Yojana as well as for all future schemes to be disbursed through DBT for persons who are otherwise intended beneficiaries of the government scheme but are not able to avail the same only for want of PMJDY account.


The DBT scheme has been beneficial on the ground level but there are some issues regarding its rigidity like the criterion for identification of poor people. But these issues can be sorted and the functionality of this scheme has a window for improvement in the future.

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