Optimising Commissions and Payout Mechanism For G2P Payments Under Electronic and Direct Benefit Transfer

• by Puneet Chopra
• Jan 20, 2014
• 1 min
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This Policy Brief tries to address the two fundamental questions of (1) what should be an appropriate fee for disbursal of G2P payments? and (2) what can be the norm or mechanism for division of the payout between banks, BCNMs and CSPs?

Over US$ 45 billion is spend every year by the Government of India on cash-based welfare schemes such as MGNREGA, social security pensions, JSY and scholarships.  Over the years, efforts have been made to improve the delivery efficiency by disbursing many of these schemes electronically, instead of in-cash, employing enhanced methods for identification and authentication of beneficiaries. The infrastructure of India Post and banks (including Business Correspondents (BCs) and Customer Service Points (CSPs)), has been extensively leveraged for these Government to Person (G2P) payments. There is, however, great variability in the fees paid by the governments to banks for disbursing these funds. Some states pay between 1.0% to 2.0% of the value disbursed, while others do not pay anything. Moreover, there is no standard basis for determining an appropriate fee that should be paid; and no norms defining how the banks should share the fees with the BCNMs and the CSPs.

If the Electronic and Direct Benefit Transfer (EBT and DBT) programmes have to be scaled up nationwide, viability of the service providers managing the last mile disbursement to beneficiaries is inevitable. This Policy Brief tries to address the two fundamental questions of (1) what should be an appropriate fee for disbursal of G2P payments? and (2) what can be the norm or mechanism for division of the payout between banks, BCNMs and CSPs?