Indian Banks Unprepared for Climate-Related Financial Risks: Climate Risk Horizons Report

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Climate Change: A Growing Risk for Indian Banking Sector A new report titled "Unprepared" by Climate Risk Horizons (CRH) has raised red flags about the Indian banking sector's readiness to tackle climate-related financial risks. As the effects of climate change escalate globally, banks in India are significantly lagging behind in integrating these risks into their core business strategies, lending practices, and disclosures. Scope and Scale of the Study The report assessed 35 of India’s largest scheduled commercial banks by market capitalisation as of March 2024. These included: 11 public sector banks 18 private sector banks 6 small finance banks Collectively, these banks account for a combined market capitalisation of ₹4,582,292 crore , representing a major portion of India’s financial system. Key Findings: Gaps in Climate Preparedness Emissions Disclosure Deficit: Only 7 out of 35 banks disclosed all three categories of greenhouse gas emiss...
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How India's Direct Benefit Transfer (DBT) Saved ₹3.5 Lakh Crore and Transformed Welfare Delivery


What is Direct Benefit Transfer (DBT)?

Direct Benefit Transfer (DBT) is a government initiative in India aimed at reforming the system of welfare delivery by transferring subsidies and financial assistance directly into the bank accounts of beneficiaries. It was formally launched in January 2013 and significantly expanded post-2014 under the Modi government as a key pillar of the Digital India mission.

The DBT system utilizes the JAM trinity — Jan Dhan accounts, Aadhaar, and Mobile phones — to ensure direct, traceable, and efficient delivery of public welfare funds, eliminating the need for intermediaries.

Key Findings: ₹3.48 Lakh Crore in Savings

A recent report by the BlueKraft Digital Foundation, as cited by the Ministry of Finance, has revealed that DBT has led to cumulative savings of ₹3.48 lakh crore from 2009 to 2024. These savings are primarily attributed to plugging leakages in subsidy delivery, eliminating ghost beneficiaries, and reducing administrative overheads.

DBT's Impact on Subsidy Expenditure:

  • Pre-DBT Era (2009-2013):

    • Subsidies averaged 16% of total government expenditure.

    • Annual subsidy burden: ₹2.1 lakh crore.

    • High leakage, inefficiencies, and corruption.

  • Post-DBT Era (2014-2024):

    • Subsidy allocation fell to 9% of total government spending in FY 2023-24.

    • Beneficiary coverage increased 16x, from 11 crore to 176 crore individuals.

    • Savings achieved without increasing the fiscal burden.

A Data-Driven Transformation:

To evaluate the broader impact, the report introduced a Welfare Efficiency Index — combining fiscal outcomes (like cost savings) with social metrics (such as number of beneficiaries reached).

  • The index rose from 0.32 in 2014 to 0.91 in 2023, indicating near-tripling of welfare efficiency.

Pros of DBT

✅ Reduced Corruption:
By cutting out intermediaries, DBT reduces opportunities for bribes, ghost entries, and leakages.

✅ Timely Transfers:
Payments are processed faster, helping beneficiaries receive funds without delay.

✅ Transparency & Accountability:
Digitized records provide auditable trails, making it easier to detect fraud and inefficiency.

✅ Scalable Infrastructure:
The JAM trinity allows for rapid scaling, covering remote and rural populations.

✅ Cost-Effective Governance:
Reduction in administrative costs and better targeting improves fiscal efficiency.

✅ Financial Inclusion:
Boosted bank account ownership and digital literacy among rural and poor populations.

Cons of DBT

⚠️ Access Gaps:
Not all citizens have seamless access to banks, Aadhaar, or smartphones, particularly in tribal or remote areas.

⚠️ Technical Glitches:
Instances of failed payments, server issues, and biometric mismatches remain a challenge.

⚠️ Exclusion Risks:
Poorly implemented systems or documentation errors can lead to eligible beneficiaries being left out.

⚠️ Over-dependence on Digital Infrastructure:
Power cuts, low internet penetration, and banking infrastructure can still hinder delivery in certain regions.

How DBT Helps Curb Corruption

  1. No Middlemen: Eliminates intermediaries who previously siphoned off a portion of benefits.

  2. Unique Identification: Aadhaar ensures that only legitimate recipients receive subsidies.

  3. Cashless Delivery: Funds go straight to the beneficiary's account, minimizing manipulation.

  4. Real-Time Monitoring: Transfers can be tracked digitally, helping prevent double payments or fraud.

How DBT Supports Economic Growth

  • Improved Fiscal Management: Lower subsidy burden means more funds available for infrastructure and social schemes.

  • Empowered Households: Timely cash transfers improve consumption, nutrition, and education outcomes.

  • Boost to Financial Ecosystem: Increased banking activity, savings, and digital payment usage.

  • Encouragement to Formal Economy: Reduction in cash transactions and informal welfare channels.

Conclusion

The Direct Benefit Transfer (DBT) system is a game-changer for governance in India. From a leaky, corruption-prone subsidy system to a transparent, digitally-driven model, DBT showcases the power of digital transformation in public service delivery.

With over ₹3.5 lakh crore in savings, rising efficiency, and a broader socio-economic impact, DBT stands as a cornerstone for inclusive growth and fiscal prudence.


Location: Pune, Maharashtra, India

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