By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She is currently writing a book about textile artisans.
So, while I was drinking my morning coffee yesterday and reflecting on the logistical troubles the United States is having in getting stimulus funds to people who need them, the following account in the Times of India caught my eye, Covid-19 lockdown: Cash reaches 40% of 20 cr women beneficiaries:
The largest-ever cash transfer scheme launched on Friday to put Rs 30,000 crore in Jan Dhan accounts of women has validated the evangelical push for implementation of the Jan Dhan scheme which saw the government exhorting crores of people to open bank accounts.
By Saturday, the accounts of around 40% of the 20-crore women beneficiaries had seen cash deposits of Rs 500 each [about $US 7). Similarly, around 8 crore beneficiaries of the Ujjwala scheme will get close to Rs 5,000 crore in their bank accounts to purchase cooking gas cylinders for three months.
Let me translate this into terms that non-Indians will understand, 1 crore is 10,000,000. So 20 crore is 200 million women beneficiaries. According to the Hindu, Women beneficiaries can withdraw ₹500 from Jan Dhan accounts from April 3:
The Indian Banks’ Association (IBA) has said that women beneficiaries of the Jan Dhan account can start withdrawing ₹500 from April 3, in the first of the three instalments of a sum of ₹1,500 relief announced by the Centre as part of the fight against COVID-19.
The government has announced ₹1,500 transfer to the women beneficiaries of Jan Dhan account holders in three instalments.
‘Under the Pradhan Mantri Garib Kalyan package, ₹500 per month is being deposited into the accounts of women Jan Dhan Yojana beneficiaries by all banks. This is first of the 3 monthly instalments,” IBA said in a statement.
The government of Prime Minister Narendra Modi launched the Jan Dhan scheme in 2014 to provide basic banking services to the considerable number of Indians- who then lacked bank accounts, but this program was the brainchild of the previous government led by Prime Minister Manmohan Singh. These accounts allow the government to make direct benefits transfers (DBTs) direct to beneficiaries without the involvement of any middleman. The latest 500 rupee cash deposit stimulus is only one such payment, and subsidized cooking gas another. Another type of DBT is payments students.
The 500 rupee cash deposits are not the only crisis payments being made at this time. According to the Times of India:
The government’s announcement will see 20 crore women Jan Dhan account holders get Rs 500 per month for the next three months; increase in [Mahatma Gandhi National Rural Employment MGNREGA] wage to Rs 202 a day from Rs 182 to benefit 13.62 crore families ; ex-gratia of Rs 1,000 to 3 crore poor senior citizens, poor widows and poor disabled.The government will also front-load Rs 2,000 paid to farmers in the first week of April under the existing PM Kisan Yojana to benefit 8.7 crore farmers, as well as extend insurance cover of Rs 50 lakh per health worker fighting Covid-19.
Private banks typically do not extend banking services to the very poor, as it costs them more to offer a bank account than they earn from offering it. Yet India still has several state-owned banks, and it has addressed the problem of the unbanked by requiring these banks to offer basic accounts to everyone who wants one. These accounts can accept DBTs, and a holder can also deposit up to 50,000 Indian rupees [about $US 650] per year. If an account holder wants to deposit more than 50,000, rupees in a year, s/he can upgrade the account to a full service account.
I immediately called one of my oldest friends in Kolkata, Tushar Roy, who is a chief manager for the Central Bank of India, one of India’s state-owed banks. He has worked as lead district manager for three years, coordinating among the central government, the West Bengal state government, and all the banks of the district, both private and state-owned, in setting up bank accounts for the unbanked. The holder of the account can access the DBT the government has made either through a branch, by banking correspondents – where there is no bank branch – or via ATMs.
“At this time, nearly every adult in India has a basic bank account, as there is no minimum balance requirement,” said Roy. “In fact, it would be extremely difficult to find an adult who does not hold an account. Even many students who are more than ten years old have their own accounts, especially those who live in rural areas and receive scholarships.”
Imperfect Indian System
Now, the situation in India is by no means perfect. For starters, economists such as Jayati Ghosh question the adequacy of the size of the overall stimulus the government has tendered – and it will almost certainly have to pony up more funds, especially if the current crisis worsens significantly (for more on this point, Saving Citizens, Killing the Poor: India and COVID-19).The purpose of this post, however, is not to discuss the size of the stimulus, per se, but rather the logistics of how is it being delivered.
I also don’t want to forget the migrant workers, many of whom remain stranded by the current lockdown somewhere between the cities in which they typically work and the rural homes they sought to reach to ride out the lockdown (see the previous link for further details).
There is a dearth of banks and ATMs in rural India, where many of the India’s poor reside, with Reserve Bank of India data showing only 45,000 of the country’s 230,000 ATMS are located in rural locations, according to the Economic Times in Coronavirus: Relief package for the poor via DBT may face hurdles. But for these people, the system provides for them to get access to money in their bank accounts by using banking correspondents.
Comparison to the US
Let’s compare the Indian situation to that of individual U.S. recipients targeted for the stimulus. Those eligible for the stimulus payments – $1200 per single filter, $2400 for married couples filing jointly, subject to income qualifications – and who either have supplied direct deposit information with the Internal Revenue Service (IRS), or who receive Social Security, should get their payments by mid-April says Treasury Secretary Steven Mnuchin, according to this account published Saturday in Business Insider, Everything we know about the coronavirus stimulus checks that will pay many Americans up to $1,200 each
Alas, for others:
If we don’t have your information you’ll have a a simple web portal, we’ll upload it. If we don’t have that, we’ll send you checks in the mail.”
Ut oh. And when, pray tell, can people expect such checks to arrive?
NBC News reports in Many Americans may have to wait months for coronavirus relief checks:
A memo circulated this week by Democrats on the House Ways and Means Committee, obtained by NBC News, says Americans who have direct deposit information on file will get their payments in mid-April, “likely” the week of April 13. The document estimates that 60 million Americans will get checks at that point.
About three weeks after those deposits go out, the IRS will start issuing paper checks, most likely the week of May 4, according to the memo. The office that issues paper checks can process about 5 million a week, so it could take 20 weeks — nearly five months — to get them all out.
The IRS will process paper checks for the lowest-income Americans first.
Some of Americans who need this money most are unbanked or underbanked; IIRC, estimates of the total combined percentage of unbaked and underbanked households hovers at about 25%. Just as in the Indian case, part of the reason this is so is that private banks would lose money by providing them with an account.
Alas, the policy India has followed – establishing basic bank accounts for the unbanked, partly so as to facilitate direct benefits transfer from the government – is not something the has chosen to pursue. Back in 2014, Then-Senator Elizabeth Warren promoted a plan to have the U.S Postal Service offer basic banking services, such as bill paying, check cashing and small-dollar loans, according to the Campaign for Postal Banking, “WHY WE NEED A BANK AT THE POST OFFICE” Such an institution, if up and running, might as in India, facilitate the transfer of stimulus funds. Instead, the proposal died – and unless I missed it, Warren did not press very hard for this idea during her campaign for the Democratic presidential nomination. (For an overview of the post office bank concept, see this 2014 post by Yves, Mirabile Dictu! Post Office Bank Concept Gets Big Boost.)
It will serve as cold comfort to some Americans, who desperately need money right now, to wait up to five months for their payments – and be told: your check is in the mail.
And, I might mention, state payments for those who qualify – unemployment benefits, for example – could also be delivered to the same accounts, once they were established.