The DBT system has transformed the implementation of welfare schemes through the JAM trinity of Jan Dhan accounts, the Aadhaar system and mobile phones, said Saurabh Garg, chief executive officer, Unique Identification Authority of India, which runs Aadhaar. “The combination of these three has ensured that over the last fiveeight years, we’ve had nearly 8 billion transactions,” Garg said during the discussion. The presence of a digital Aadhaar-based DBT system proved to be a key support for people in rural areas during the pandemic.
The DBT system was introduced in 2013 with the objective of bringing the unbanked within the banking system, using the Aadhaar system as its backbone. The two accomplishments of this system were scaling up access to bank accounts and streamlining government-to-people payments through DBT, according to Mehnaz Safavian, lead financial sector specialist at the World Bank.
The DBT has managed to sharply shrink the gender gap in financial inclusion to 6% from 20%, Safavian said. The digital infrastructure has also enabled greater scope for innovation in the financial services sector. “The numbers are huge and this is going to be 10x in the next two-three years and a lot more innovation is going to happen at the user interface and user experience game,” said Abhinav Sinha, cofounder at Eko India Financial Services.
“For the DBT-enrolled customers, they could operate with us to a reasonable degree or without contact,” said Rajeev Yadav, managing director, Fincare Small Finance Bank. Digital adoption was also accelerated by the pandemic as withdrawals by DBT beneficiaries increased two-thirds last fiscal. “Withdrawals by individuals in 2020-21 were about Rs 392 crore compared with 2019-20 of Rs 236 crore,” Garg said.
The Aadhaar-based Direct Benefit Transfer (DBT) system has brought banking access in some form to about 80% of India’s population by 2017, up from 50% in 2014. Plans are afoot to provide DBT beneficiaries access to a larger bouquet of financial services, said the panellists at a plenary session at the ET Financial Inclusion Summit.
The Aadhaar-based system has enabled the India Post Payments Bank to open about 40 million accounts over the last two years, according to J Venkatramu, its managing director. “Every two seconds one account is being opened. That’s the pace at which we were able to open accounts and it’s all because of Aadhaar,” Venkatramu said.
Going forward, India Post Payments Banks is working toward offering its customers DBT-based credit facilities through tieups with banks and NBFCs.
“Where you know that a certain amount of money is coming regularly in the form of DBT, so taking that as a surrogate, if a credit facility can be provided…And those are the kind of initiatives we are trying to undertake in association with NBFCs and banks,” Venkatramu said. To increase the reach of the Aadhaar-based system, the government was planning to provide 150,000 postmen with devices that will enable Aadhaar updation, Garg said. The government was working toward enabling more mobile-based services so beneficiaries can operate accounts without an intermediary since the country was seeing strong growth in smartphone usage.
“The other area where financial inclusion would also penetrate is on the insurance, pension and MF side,” Garg said adding that the Sebi, the Insurance Regulatory and Development Authority and the Pension Fund Regulatory and Development Authority were working with Aadhaar to bring their products to the DBT system.
“The other area where financial inclusion would also penetrate as we move ahead is on the insurance, pension and mutual fund side,” Garg said, adding that the Securities and Exchange Board of India, the Insurance Regulatory and Development Authority and the Pension Fund Regulatory and Development Authority were working with Aadhaar to bring their products to the DBT system.