Direct Benefits Transfers

How e-RUPI can transform government’s welfare schemes


From UPSC perspective, the following things are important :

Prelims level: e-RUPI

Mains level: Paper 3- e-RUPI and its advantages


Recently e-RUPI was launched by the Prime Minister.

About e-RUPI

  • It is a digital prepaid, purpose, and person-specific payment utility. 
  • Built on the UPI platform, e-RUPI is easy to scale by the issuer.
  • At the point of presence, the verification code received by the beneficiary is shared with the service provider to authenticate and authorize the transaction: Contactless, real-time payment, and online settlement of funds into the service provider’s bank account.
  • Fourteen leading banks have already integrated it with their systems.
  • e-RUPI is almost custom-designed for school voucher programs.
  • The efficacy of these programs is well established in many countries. 


The adoption of e-RUPI in various government programs will enhance business efficiency, simplicity, transparency, and accountability in these programs.

1) e-RUPI can make cash transfer purpose and person-specific

  • Policymakers have debated whether direct cash transfers deliver benefits more efficiently than in-kind transfers like the Public Distribution System (PDS) and fertilizers.
  • e-RUPI could break the policy logjam with the following advantages:
  • 1) It will make cash transfers purpose- and person-specific.
  • 2) Freeing them from dependence on bank accounts.
  • 3) Providing visibility from the time of issue until redemption.

2) e-RUPI can make PDS more efficient

  • The inefficiency of PDS is rooted in high overhead costs, leakages, exclusion, and inefficiencies.
  • A food-specific e-RUPI voucher will allow beneficiaries to buy rations from an outlet of their choice.
  • It will also help promote the One Nation, One Ration Card.
  • The move will also help in removing price distortion and the redemption of the voucher at market price by merchants within and outside the PDS network.

3) Streamline fertilizer subsidy

  • e-RUPI will enable farmers to buy fertilizer at nominal prices with direct credit of the subsidy amount into the account of the authorised dealers.
  • As far back as 2011, a task force on direct transfer of subsidies on kerosene, LPG and fertilisers headed by Nandan Nilekani had suggested a roadmap for direct cash transfer of fertiliser subsidies in a phased manner.
  • The e-RUPI will allay apprehensions about creating an IT infrastructure, managing nearly 3,00,000 fertilizer sale points, the collapse of dealer network due to liquidity squeeze in the event of subsidy payments getting delayed, and a complex system of timely credit of subsidy into an estimated 129 million Aadhaar-linked bank accounts of farm households.

4) Basic income support

  • The Covid-19 pandemic has revived interest in Universal Basic Income (UBI).
  • The lockdowns to contain the pandemic exposed the poor to acute distress, due to loss of means of livelihood.
  • e-RUPI can mitigate their stress by rapidly distributing food and cash vouchers at scale.

5) Ayushman Bharat

  • In the Ayushman Bharat healthcare initiative beneficiaries can be given e-RUPI vouchers of designated value tenable at empanelled healthcare facilities, providing them portability and facility choice.
  • The service provider will benefit from the immediate payment.

Way forward

  • Ownership agency: The Aadhaar experience suggests ownership must vest with a specific agency.
  • Make distribution and acceptance compatible: Making the distribution and acceptance of e-RUPI incentive-compatible is recommended, as demonstrated by the popularisation of prepaid telephony by the telecom industry.
  • Light regulation and competition promotion: Light regulation and the opening of e-RUPI to the competition will spur innovation and adoption.
  • All banks, small and big, NBFCs, non-bank PPI issuers, and telcos may be allowed to issue it later.


e-RUPI opens up a world of opportunities to the government, people, and businesses to provide, avail, and pay for services seamlessly.

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