Government to pay 2% commission to banks for direct benefit transfers; Finance Ministry to finalise order

Finance Ministry is in the process of finalising the commission to banks at 2% of the quantum of funds they transfer to individual beneficiaries under the government's direct benefit transfer (DBT) scheme.

"The issue of commission is in the final stages and the order will be issued for paying 2% commission to banks shortly," Anurag Jain, joint secretary (financial inclusion and chief vigilance officer) in Finance Ministry said at a Ficci-organised banking summit through video conferencing this evening. The present rate of commission is 1%.

The government transfers money to the bank account of consumers of kerosene, LPG, among others, through its direct benefit transfer scheme to plug loopholes and ensure corruption free delivery. Many analysts have been calling for limiting the subsidy deliveries, including PDS food grains, through the Aadhaar-linked bank accounts to curb corruption and ensure better delivery.

While speaking to reporters later, Indian Bank Association chief executive MV Tanksale said, "For all accounts whether under Pradhan Mantri Jan Dhan Yojana or otherwise, if subsidy is routed through the DBT scheme, 2% of the total amount will be given to banks as administration cost." 

This money will not be deducted from the consumers account but the government will spend additional 2%. For instance, if a bank transfers Rs 100 crore a year as DBT payments, government will transfer Rs 102 crore to that bank. He said the government has already approved 1% commission for banks for every transaction under the DBT.

"We said our cost is 3% (for every transaction under DBT) and they have agreed on 2%," Tanksale said.

Earlier in the day, addressing the same event, the Reserve Bank Governor Raguram Rajan had laid emphasis upon the need for banks to make all social sector mandates, given by the government, financially sustainable.