Direct Benefit Transfer to get a boost after RBI clarifies on Aadhaar

Move will also remove duplication of accounts opened under govt’s financial inclusion scheme Jan Dhan Yojana

New Delhi: In a move that would facilitate more effective implementation of the direct benefit transfer (DBT) scheme, the Reserve Bank of India (RBI) has clarified that banks can seed accounts with Aadhaar unique identity numbers in case the beneficiary agrees.

This will also help in de-duplication of accounts opened under the government’s flagship financial inclusion scheme, the Pradhan Mantri Jan Dhan Yojana, which aims to provide every household access to basic banking services.

In a notification on Thursday, RBI said that in view of the Supreme Court order on Aadhaar, “use of Aadhaar Card and seeding of bank accounts with Aadhaar numbers is purely voluntary and it is not mandatory”.

This will remove ambiguities over the linking of Aadhaar with bank accounts.

Hearing a number of petitions against the use of Aadhaar, the Supreme Court, in an interim order in October, permitted the use of the unique identity numbers for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), the Pradhan Mantri Jan Dhan Yojana, pension payments by central and state governments, and the Employees’ Provident Fund scheme, in addition to the public distribution system and payment of subsidies for cooking gas and kerosene.

In less than two years, the government has managed to bring several payments—pensions, scholarships and cooking gas subsidy—under the ambit of DBT, wherein the beneficiaries’ account is directly credited.

The government will also launch DBT for kerosene from 1 April.

The government, financial sector regulators and financial institutions are awaiting a final order by a five-judge constitutional bench of the Supreme Court for clarity on the scope of using Aadhaar.

Aadhaar could be used for delivering the benefits of various social security schemes to plug leakages. For instance, it could be used to facilitate e-KYC (know your customer) verification for opening bank accounts to facilitate DBT and lower delivery costs.

Finance Minister Arun Jaitley has hinted that the government is looking to give Aadhaar legislative backing and is working on a new version of the Unique Identification Authority of India bill.

“There are many ghost ration cards that are made and people continue to claim subsidy or pension based on such proofs. Aadhaar will correct this,” said 
N. C. Saxena, a former member of the erstwhile National Advisory Council.

“However, Aadhaar cannot help in identifying who is poor and who is rich. Banks will not be able to establish whether that person is eligible to get that entitlement but at least this will help in ensuring that the beneficiary is identified and there is no duplication,” he said.

As per data available with the government, of the more than 200 million bank accounts opened under the Jan Dhan Yojana, less than 50% have been seeded with Aadhaar. However, the number of Aadhaar cards issued so far is more than 900 million.