Direct Benefits Transfers

What is Public Financial Management System (PFMS)?


From UPSC perspective, the following things are important :

Prelims level: PFMS, PAC

Mains level: Read the attached story


The Public Accounts Committee (PAC), in its report found that the tasks related to the implementation of the PFMS appeared to have been dealt with a casual approach and there was no proper financial planning.

Public Finance Management System (PFMS)

  • PFMS is an online platform developed and implemented by the office of the Controller General of Accounts (CGA) under the Union Ministry of Finance.
  • The PFMS portal is used to make direct payments to beneficiaries of government schemes.
  • PFMS initially started as a Plan scheme named CPSMS of the Planning Commission in 2008-09 as a pilot in four States of Madhya Pradesh, Bihar, Punjab and Mizoram.
  • It was for four Flagship schemes e.g. MGNREGS, NRHM, SSA and PMGSY.
  • In December, 2013 the Union Cabinet approved the national roll out of PFMS for all States.

Mandate of PFMS

PFMS has been mandated the following:

  • It acts as a financial management platform for all plan schemes and allows for efficient and effective tracking of fund flow to the lowest level of implementation for the planning scheme of the Government.
  • It is mandated to provide information on fund utilization leading to better monitoring, review, and decision support system to enhance public accountability in the implementation of plan schemes.
  • To result in effectiveness and economy in Public Finance Management through better cash management for Government transparency in public expenditure and real-time information on resource availability and utilization across schemes.

Achievements of PFMS

  • PFMS can be credited to the transformation of Direct Beneficiary Transfers space in financial governance in India.
  • An estimated 102 crore DBT transactions were done through PFMS in FY 19-20 amounting to about ₹2.67 lakh crore.
  • Through efficient use of technology, PFMS is estimated to have saved about ₹1 lakh crore in direct beneficiary transfers.

Factors that could determine the successful evolution of PFMS in future

  • Agility in terms of Onboarding/Integrating all Govt. accounts: Only after ensuring significant coverage, the true execution of the concept will take place.
  • Effective data management capabilities: PFMS will have to add significant data management capabilities in order to ensure better monitoring/review to deliver on the idea of a decision support system for effective cash management or management of idle float in the system.
  • Constantly upgrading: Adaption to rapid changes in technology is another key area that would call for a considerable amount of focus both in terms of gradation and monitoring.
  • Collaboration with the banking system: Lastly, one of the most critical factors for the successful execution of PFMS is its integration with the banking systems.

What did PAC observe now?

  • PAC is concerned over data security of PFMS.
  • It observed that in the absence of a dedicated workforce, a key strategic system like the PFMS could possibly encounter new threats every now and then owing to the advancements in technology.
  • It stressed the need for a thorough assessment of physical and technical infrastructure along with back-up arrangements required in the PFMS scheme.


  • The PFMS has revolutionized the ways public finances are managed in the country.
  • With constant improvement and increasing coverage, the scope of PFMS is ever-increasing.

Back2Basics: Public Accounts Committee

  • The PAC is a committee of selected members of parliament constituted for the purpose of auditing the revenue and the expenditure of the Government of India.
  • It was established in 1921 after its first mention in the Government of India Act, 1919.
  • PAC is one of the parliamentary committees that examine the annual audit reports of CAG, which the President lays before the Parliament of India.
  • It seeks to examines public expenditure.
  • Those three reports submitted by CAG are:
  1. Audit report on appropriation accounts
  2. Audit report on finance accounts
  3. Audit report on public undertakings

Its members-

  • It consists of not more than twenty-two members, fifteen elected by Lok Sabha and not more than seven members of Rajya Sabha, the upper house of the Parliament.
  • The members are elected every year from amongst its members of respective houses according to the principle of proportional representation by means of single transferable vote.
  • None of its members are allowed to be ministers in the government.


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