COVID-19 has impacted the world economy in an unprecedented way. As a result, big corporates, small and medium enterprises, and micro businesses are struggling for survival. Daily wage earners, laborers, taxi and auto-rickshaw drivers, contractual laborers, and gig workers are staring at an uncertain future because of loss of livelihoods.
Government of India and several state governments have taken steps to support almost all population segments that have been adversely impacted, and to allow limited economic activities. In India, the central government and the state governments have done a commendable job of mobilizing and disbursing large amounts quickly. More than Rs.56,000 crore ($8.0 billion approximately) have been transferred to more than 630 million beneficiary accounts.
- Rs.28,256 crore to 31.77 crore beneficiaries under PM Garib Kalyan Yojana,
- Rs.2,000 crore to 6.93 crore families under PM Kisan Yojana,
- Rs.9,930 crore to 19.86 crore women Jan Dhan accounts,
- Rs.1,405 crore to 2.82 crore senior citizens, widows and differently abled, and
- Rs.3,066 crore to 2.16 crore building and construction workers.
A few states are trying different measures to reach the target populations. Uttar Pradesh state government is trying to reach to that section of the population, who is eligible for social protection payments but are not registered for the same. The state’s government has distributed Rs.236.98 crore as sustenance allowance (Rs.1,000 each) to 23.70 lakh beneficiaries as of April 17, 2020. Bihar state government has enabled a web-link for registering migrant workers only outside of the state. Making use of geo-fencing technology to identify the beneficiaries, Bihar government has transferred the sustenance allowance to 13 lakh beneficiaries as of April 17, 2020. The registration numbers show that 44.5% of total transfers were made in Delhi, Haryana and Maharashtra.
The moot question is- what proportion of this money is reaching the target beneficiaries, how much of it is being withdrawn, and how much of it is being utilized? The social protection funds transferred by the central and state governments into beneficiary accounts will achieve the objectives of sustaining the poor through the lockdown period (immediate relief) and to revive the economy (mid to long term objective), only if these funds are withdrawn and utilized by all recipients.
Low utilization of these funds will have two negative outcomes:
- Beneficiaries will face problems in feeding and maintaining their families, and will take a longer time to recover from the impact of loss of livelihood, and
- The local economy, ultimately aggregating in the national economy, will also take a longer time to revive. Non-withdrawal and non-spending by beneficiaries will lead to liquidity and cash flow challenges throughout the different levels of supply and value chains leading to closure of tens of thousands of small businesses and MSMEs.
The challenge for the sub-district, district, and state administration is that there is no mechanism to ascertain:
- The proportion of the beneficiaries who are aware about the transfers, and
- The proportion of beneficiaries who have withdrawn cash from their accounts. (In these difficult times it is fair to assume that all beneficiaries would be in need of money and therefore are likely to withdraw cash instead of letting it lie idle in their accounts.)
Our interactions with a few senior district officials and a quick dip-stick survey with rural households and civil society organizations indicate that there is no mechanism to track the withdrawal and spending of social protection payments disbursed into beneficiary accounts.
It is important to note that in September 2019, 6.60 crore out of 37.11 crore, that is 17.8 per cent Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts, were dormant., The latest data on PMJDY website (last updated on April 15) shows that the average balance in PMJDY account is more than Rs.3,400 per account. This is a substantial amount for poor households and one would imagine that a majority of account holders, if not all, would have withdrawn this amount to survive the lockdown period. The average balance in February 2019 was Rs.2,633, and in October 2019 was Rs.2,853.
The data points mentioned above combined with the insights gained by interaction with local administration strongly suggests that many beneficiaries may not have accessed their social payments during this crisis. Probable reasons for non-withdrawal could be one or more of the following:
Lack of Awareness:
- Many beneficiaries are unaware of their accounts which were opened under PMJDY
- Amount is transferred into the last-seeded account with Aadhaar number, which is at times seeded without the knowledge of customer
- Many beneficiaries are not aware of their eligibility for the social protection payments
- As it is a norm to change SIM card frequently to avail offers by service providers, there is a very strong possibility that the beneficiary do not own the number linked mobile number any more, therefore, they miss any notification of amount being credited into the bank account.
Lack of Access:
- Beneficiaries are not able to withdraw money from bank branches, because banks are operating at sub-optimal levels owing to the lockdown and social distancing measures
- It is well known that ATM cards issued to beneficiaries did not reach a substantial proportion of account holders. Among those who received ATM card, a large proportion did not receive PIN, which is sent separately and must be collected from bank branch in case of PSU banks.
- ATMs are very often too far from rural areas and usually with limited or no cash. Many ATMs are out of cash as these are not being serviced with the same frequency as in normal times
- Common Service Centres are also at a significant distance and provide remittance services only to those who physically visit the centres
Information about beneficiaries who have not withdrawn cash from their account, will help administration develop and execute a targeted operational and communication plan, increasing the impact of financial support provided by the government. Currently, there is no mechanism available with the local and/or district authorities to know the actual number of beneficiaries and vulnerable individuals/households who should be and are receiving the support money under various government schemes. Potential solutions could be a periodic report shared by the Reserve Bank of India with the government or using the business correspondents to gather information that could be collated by their corporate aggregators and reported to RBI, along with withdrawal from CSC points. The point here being that the government is trying hard to minimize the pains for the vulnerable populations. It would be worth making extra efforts by other stakeholders including government agencies, financial service providers, BC aggregators, and technology service providers to strengthen the last mile delivery and MIS reporting for better decision making.
Mukesh Sadana is Senior Advisor, Revamp.
Vartika Shukla is Head-Strategy and Partnerships, Revamp.
Views expressed are personal.
 A dormant account is one where no transaction has taken place over the last one year.