Subsidies through banks by Direct Cash Transfer (DCT) from 2013: benefits, drawbacks and analysis

The Government of India has made a provision of paying the subsidies of the beneficiary consumers in form of a Direct Cash Transfer (DCT) into their Unique Identification (UID) Aadhaar card Number based and linked bank accounts from the 1st' January, 2013 to stop the losses and corruption caused by the middlemen. Let us discuss the benefits and drawbacks of this ambitious project of the government in an open analysis manner.

It is definitely a pleasing a news to various subsidy beneficiaries of different states across India, especially for those who face several issues of hindrances in receiving their quota of goods in physical form. To tell you an exemplary fact, the amount of subsidies released by the Government centrally are delivered to its beneficiaries in lesser amounts. These types of incidents have continued to be repeated for past few years and so, the Government of India has finally decided to pay the subsidies in the form of electronic cash into the UID Aadhaar card linked bank accounts of the beneficiaries. As per the rule of this new project, the amounts will be paid through the Direct Cash Transfer (DCT) system from January 1, 2013 and it will first commence its activity in the 51 districts of various states where people have been issued the Aadhaar cards.

Major benefits of the 'Subsidies through banks' or 'Direct Cash Transfer' system

Well, the Subsidies through banks or Direct cash transfer scheme have some unique and notable benefits for the beneficiaries as follows:-

  • First of all, the corruption caused by the middlemen or ration card dealers will be completely diminished.

  • There will be no chance or room for managing any kind of black activities to incur losses of the beneficiaries.

  • People will receive the equivalent amount of cash for their quota of goods in their bank accounts which means that there will be no need to bother about it as it will be made through an e-transfer system.

  • Since major nationalized banks will play the most active roles in this scheme, the Reserve Bank of India (RBI) has given its approval to open new branches of banks in all rural areas of India. This will facilitate the easy reach of the said money to its assigned persons.

  • With the increase of numbers in banks, the number of employment opportunities for qualified and educated jobless individuals will also increase at the same rate and thereby poverty and the problem of having no income will be fixed instantly.

Drawbacks of the subsidies through banks or Direct Cash Transfer (DCT) System

It is also a well known fact to all that each and every small or big Government projects in India have some loopholes. And in the context of this scheme, there are also many drawbacks in completing an e-transfer of direct cash for the subsidies into the beneficiaries' bank accounts. Read out the lines below carefully.

  • One of the most shameful fact is that maximum subsidy enjoyers in India don't have a bank account.

  • Even if they have it, most of these beneficiaries do not know how to operate a bank account or withdraw cash by filling a cash withdrawal form.

  • Since, the scheme is said to be commenced on the basis of the Aadhaar card holders, it is here noteworthy that this Unique Identification Number based Aadhaar card scheme has been rejected in the Parliament of India. So, a million dollar question is: how the beneficiaries will get their subsidy cash amounts to their UID Aadhaar linked bank accounts when the Aadhaar itself is not approved? Will the transfer of money be completed successfully?

  • Since the transactions will not complete successfully, there is a big chance for fraud officers to siphon money from the beneficiaries' accounts which will create even bigger havoc for the consumers and there will be an upraise or revolution by the public.

  • Again there is also a very legitimate advantage for the entry of bogus and fake recipients in the list of the subsidy beneficiaries and the innocent ones who deserve it will be completely ignored and omitted without their knowledge. Is it not really injustice?

My assessment and opinion on the subsidies through banks scheme 2013

Well, so far so good, the subsidies through direct cash transfer (DCT) to banks scheme 2013 is hanging as a 50-50 case for me. What I want to say is that it has equal positive and negative effects. But I don't mean to say that I am not in its support. But still I suggest some points to be ensured by the Government before this scheme starts its launch in the respective Aadhaar linked zones. Here are what I have to say:-

  • The UID Aadhaar scheme should be and has to be recommended and passed in the Parliament of India.

  • Within each 10 kilometers of every rural area of India, there should be a branch of nationalized bank.

  • There should be special verified advantage for withdrawing cash for the illiterate subsidy beneficiaries in the banks.

  • There should be strict rule for no duplication of names for a single person, especially for the clever people who have multiple evidences to show. This will ensure the accuracy of the National Population Rate (NPR) and hence maximum number of beneficiaries will be embursed.

  • Beneficiaries of all subsidies should have equal right open bank accounts. Especially students who receive scholarship have no ID proof due to underage specifications and they should be issued Aadhaar cards through their concerned institutions and be given special advantages.

    [Note:- It is an important point to remember that over 270 million people have been enrolled by UIDAI and 220 million people have been issued unique numbers. The issue of these numbers is going at a speed of 1 million people per day. Hence, we can easily hope that sooner or later it will cover up the whole India.]

  • There should be particular dates specified on which no other person than a subsidy beneficiary will visit bank. For example, if the government makes a rule that the 1st and 2nd of every month for pensioners, 3rd for retail beneficiaries and 4th for other categories as a national rule, then I am pretty much sure all beneficiaries will abide by the disciplinary rule and payment transactions will complete successfully.


From the above discussion, I can tell clearly that Indian states with higher literacy rate will benefit the maximum from this new scheme. So, Kerala is obviously upbeat for the subsidy revolution as its two districts Wayanad and Pathanamthitta are in the list of UID linked 51 districts. Again, as of the latest news, the north-western state of Rajasthan also hopes to save at least INR 1000 crores from this DCT system. In capital New Delhi, the kerosene users have been declared to receive cash subsidy and gas connection simultaneously. People with the below poverty line (BPL) and Antodaya Anna Yojana (AAY) cards will receive their subsidy amounts directly into their bank accounts. Some experts opine that these are UPA's deceptive means for pulling votes from the upcoming Loksabha election poll 2014 while others conclude that these schemes should be launched without further delay. But I want to say that whatever be the result in election, people of India should not be left out from any benefit they deserve.

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Author: K Mohan27 Jun 2013 Member Level: Platinum   Points : 4

Since this scheme has been clubbed with the necessity of having Aadhaar card also, many house holds across the country have not applied for that card and the scheme may run into rough weather. In AP though the Government has set up many number of Aadhaar centers, still people are yet to get the cards and they are not able to get the print out from the official website which is always down with servers not responding. With this confusion over four months now, the gas subsidy which is supposed to be implemented on war footing in some districts of AP has been kept on hold.

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