Loading…
The Government launched Central Bank Digital Currency-based Direct Benefit Transfer under the Pradhan Mantri Garib Kalyan Anna Yojana in the Union Territories of Chandigarh and Dadra & Nagar Haveli on 14 August 2026.
Food subsidy is credited as programmable Digital Rupee tokens into a beneficiary's CBDC wallet instead of a conventional bank account, and can then be spent only at empanelled merchants on foodgrains — smartphone users paying by QR code and feature-phone users through an OTP-based mechanism.
The two UTs become the first in the country to operationalise food subsidy transfers to all eligible PMGKAY beneficiaries in CBDC form; earlier pilots ran in Gujarat from 15 February 2026 and Puducherry from 26 February 2026.
The launch was led by Union Minister Pralhad Joshi with Punjab Governor and Chandigarh Administrator Gulab Chand Kataria and Union Minister Shivraj Singh Chouhan; the government describes it as the first large-scale application of CBDC in a Central Government welfare programme.
Supporting figures cited: DBT has saved over ₹4 lakh crore by reducing leakages; more than 59 crore Jan Dhan accounts hold deposits exceeding ₹3.10 lakh crore; and UPI processed over 2,400 crore transactions worth more than ₹30 lakh crore in July 2026, accounting for nearly 49% of global real-time digital payment transactions.
Conventional Direct Benefit Transfer credits money to a bank account. Once there it is fungible: the state can prove the transfer happened but not what the money bought, and the beneficiary must typically withdraw cash to use it. A Central Bank Digital Currency is a direct liability of the central bank issued in token form, and a token can carry conditions in its code — validity for a specified purpose, at specified merchants, within a specified period. That is what 'purpose-bound' and 'programmable' mean here: the food subsidy can only be spent on foodgrains at empanelled shops, so the leakage the state is guarding against shifts from diversion of grain to diversion of cash, and even that is closed off. The trade-off is equally real and is the standing critique — programmability restricts the recipient's choice and creates a traceable record of an individual's welfare spending, which is why the design deliberately widens permitted purchases beyond wheat and rice to pulses and other essential food commodities. Note also the accessibility design: an OTP-based route for feature phones is what keeps a token system from excluding the poorest, who are least likely to own a smartphone.
Simple Analogy: Ordinary DBT is giving someone cash and trusting them to buy groceries; programmable CBDC is giving them a voucher that the shop's till will accept only for groceries — except the voucher is central bank money and settles instantly.
Provide free foodgrains to beneficiaries covered under the National Food Security Act
Key: Launched on 26 March 2020 as part of the COVID-19 relief package and repeatedly extended. It covers beneficiaries under the NFSA, 2013 — Antyodaya Anna Yojana households and priority households — and the release states that free ration now reaches more than 80 crore beneficiaries. The nodal ministry is Consumer Affairs, Food and Public Distribution.
Give a statutory right to subsidised foodgrains to a defined share of the population
Key: Provides for two categories of beneficiary — Antyodaya Anna Yojana households, entitled to 35 kg of foodgrains per household per month, and priority households, entitled to 5 kg per person per month. PMGKAY sits on top of this statutory entitlement structure.
Issue central bank money in digital token form
Key: The Reserve Bank of India launched the wholesale pilot (e₹-W) on 1 November 2022, initially for settlement of secondary market transactions in government securities, and the retail pilot (e₹-R) on 1 December 2022 within a closed user group of customers and merchants through participating banks. Programmability and offline capability are the features that distinguish it from ordinary digital payments.
Allow a ration card holder to draw entitlements from any fair price shop anywhere in India
Key: Built on Aadhaar-based biometric authentication at ePoS devices and a nationally portable beneficiary database — the reform that made PDS entitlements travel with migrant workers rather than with their home district.
Transfer benefits directly into beneficiary accounts to cut intermediaries and leakage
Key: Cited in the release as having generated savings of over ₹4 lakh crore. It rests on the JAM trinity — Jan Dhan accounts, Aadhaar and mobile phones — the same foundation on which UPI and now CBDC-based transfers are built.
Make foodgrain distribution traceable end to end
Key: Digitisation of ration cards and beneficiary databases, Aadhaar-based verification, ePoS authentication, online supply-chain management and portability under ONORC, extended by initiatives named in the release as Rightful Targeting, SMART-PDS, NIRMAL, VLTS and SAKSHAM.
Issues the Digital Rupee. CBDC is a direct liability of the central bank, distinct from commercial bank deposits and from UPI, which is a payment rail over bank money rather than a currency.
Administers PMGKAY and the Targeted Public Distribution System, and has driven the technology reforms — ration card digitisation, ePoS authentication, ONORC and now CBDC-based transfer.
The first State or Union Territory to operationalise CBDC-based food subsidy transfer for all eligible PMGKAY beneficiaries; the rollout is framed as a proof of concept and a scalable template for other States and UTs.
| Aspect | UPI | Conventional DBT | CBDC-based DBT |
|---|---|---|---|
| What moves | A payment instruction over bank deposits | Bank money credited to a beneficiary account | Digital Rupee tokens, a direct liability of the RBI |
| Can the use be restricted | No | No — money in an account is fungible | Yes — tokens can be purpose-bound to foodgrains at empanelled merchants |
| Requires a bank account | Yes | Yes | A CBDC wallet, rather than a conventional account |
| Traceability of end use | Merchant-level only | Not traceable after credit | Traceable through to the purchase |
| Access for feature phones | Available through USSD-based routes | Cash withdrawal typically required | OTP-based mechanism provided |
Jan Dhan accounts, Aadhaar and mobile phones are the substrate on which DBT, UPI and now CBDC-based welfare transfer have each been layered — the clearest Indian example of stacked digital public infrastructure.
A retail CBDC is central bank money held directly by the public; large-scale adoption raises questions about deposit disintermediation from commercial banks that are central to the global CBDC debate.
PMGKAY sits on the statutory entitlement created by the National Food Security Act, 2013, which itself followed sustained litigation and the Supreme Court's directions on the right to food.
Programmable money is a third position between the two — it delivers cash-like flexibility across a permitted basket while retaining in-kind restrictions on end use.
The OTP route for feature phones is a deliberate design against digital exclusion, the standard failure mode when a welfare system is moved onto a smartphone-first rail.
General Awareness > CBDC, Digital Payments and RBI
GS Paper 2 > Governance > Welfare Schemes and DBT; GS Paper 3 > Money and Banking
General Awareness > Government Schemes and Economy
General Awareness > Current Affairs
CBDC has featured in banking exams every year since 2022 and increasingly in UPSC Prelims; welfare-delivery applications are the newest and most testable angle.
Central Bank Digital Currency — legal tender in digital token form, a direct liability of the central bank, issued in India as the Digital Rupee (e₹).
The ability to encode conditions into a token — permitted purpose, merchant category or validity period — so the money can only be used as intended.
A transfer that can be redeemed only for a defined class of goods or services, here foodgrains at empanelled merchants.
Jan Dhan accounts, Aadhaar and mobile connectivity — the three-part foundation of India's direct transfer architecture.
Electronic point of sale device at a fair price shop, used for Aadhaar-based biometric authentication of the beneficiary.