Coronavirus: Relief package for the poor via DBT may face hurdles

Mumbai: The government’s relief package for those hit the worst by the Covid-19 lockdown will need to quickly overcome operational and logistical hurdles in order to be effective, as it involves the direct transfer of such handouts through Aadhaar-linked bank accounts.

The finance ministry said ₹1.75 lakh crore will be given to “80 crore poorest Indians” under the Pradhan Mantri Garib Kalyan Yojana (PMGKY) over three months starting April 1.

Participants in the direct benefit transfer (DBT) architecture such as banks, ATM operators, Bank Mitras and fintech companies running payment systems aren’t sure if the process will function seamlessly.

Challenges include having adequate cash in ATMs, operational efficiency of the Aadhaar-enabled Payment System (AePS) at scale and the negligible digital payment acceptance infrastructure in rural areas, where there aren’t too many cash machines in any case, they said. A significant number of people still don’t have bank accounts and many of those that do haven’t linked them with Aadhaar.

Constraints Faced by Bank Mitras

There are an estimated 1.1 billion operational bank accounts, of which 800 million have been seeded with Aadhaar.

“The low acceptance of digital payments is definitely a challenge in rural areas,” according to State Bank of India (SBI) chairman Rajnish Kumar.

“It is however an awareness and habit issue as well. We are urging all our customers to use digital means to transact as much as possible.”

The DBT model depends on the JAM (Jan Dhan-Aadhaar-Mobile) architecture to directly remit government-sanctioned welfare funds to beneficiary bank accounts. That raises questions about how relief funds will be given to those without bank accounts, especially migrant workers.

Of the 230,000 ATMs in the country, only 45,000 are in rural areas, as per Reserve Bank of India (RBI) data.

“Cash for white-label ATMs is normally sourced from local bank branches but with the low inflow of cash to bank branches in these areas due to reduced commerce, we are now facing cash shortages resulting in a number of ATMs being unavailable to the needy,” said Rustom Irani, MD and CEO of cash business, Hitachi Payment Services, which maintains cash machines in India.



Inadequate supply could lead to a dash for cash in an economy where over 90% of combined rural and urban retail spends are still made with paper money, said a stakeholder.

“An immediate concern is transfer of foodstock from rural to urban areas where almost the entire logistics is driven by cash,” said the person.

Restrictions on movement mean that regular maintenance of ATMs becomes difficult, making them prone to malfunction.

“There are on-ground challenges related to the concerned staff not being able to commute and render their work owing to fear and confusion,” said Ravi Goyal, chairman of AGS Transact, an ATM service provider for banks.

Under these circumstances, much of the burden for conversion of relief funds to currency notes for the urban and rural poor may fall upon the country’s estimated 1 million Bank Mitras or outsourced banking agents. Several concerns on the operation of these agents have also come to fore.

“Only 30% of our Bank Mitras have been able to ply due to travel restrictions imposed by local area authorities despite their services being classified as essential by the government,” said Seema Prem, CEO of FIA technology, a financial inclusion service.

Furthermore, these agents, who also act as micro ATM points, allowing rural customers to withdraw cash through the AePS, don’t have enough currency notes due to the halt in economic activity. Some are using previous experience as a guide.

“We are treating our experiences during demonetisation as a preparation for coronavirus,” said Anand Bajaj, CEO PayNearby, a leading AePS facilitator.

The sudden spike in transaction traffic owing to DBT withdrawals may also put pressure on the AePS infrastructure, where failure rates are higher than other digital payment channels. Transaction failures in AePS in some zones are as high as 45%, said a person with knowledge of the matter.

“In the absence of any directions from the finance ministry, it would require coordinated efforts of the entire banking and payments ecosystem to reach out to these unbanked citizens for transfer of relief funds,” said a top official wishing not to be named.

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