To ensure more inclusive education, the Indian government provides numerous financial aids to students through scholarship schemes. By bridging the gap between the financial capabilities and academic potential, it’s a great way to help them concentrate on their studies. Considering the huge budget allocation happening in the educational sector, plenty of scholarships are available to the public irrespective of their financial background. But the intention of these schemes is under concern as there are increasing gaps and loopholes in implementation, such as fund mismanagement, delays, ghost beneficiaries, etc. Even though Direct Benefit Transfer (DBT) addresses many concerns, the emergence of Central Bank Digital Currency (CBDC) can fix the gap and ensure that the objectives of these schemes are fulfilled.
Major scholarship schemes in India
A wide range of educational levels, from primary education to postgraduate/research studies, are covered under different schemes introduced by the government. Eligibility criteria of these can vary based on the educational qualification, performance, family background, demographics, etc. Some key scholarship schemes in India include:
1. Central Sector Scheme of Scholarship for College and University Students: To support meritorious students with annual family income below INR 4.5 Lakh pursuing higher education. This scholarship provides INR 12,000 per annum for the first 3 years and INR 20,000 per annum for the fourth and fifth years. Currently, this amount is disbursed through the DBT mode to the savings bank account of the recipient through the Public Financial Management System (PFMS) gateway [1].
2. Prime Minister’s Scholarship Scheme (PMSS): To encourage technical and post-graduate education for widows and wards of ex-servicemen, this scheme was introduced in 2006. As of now, INR 2,500 per month for boys and INR 3,000 per month for girls are paid through ECS into the bank account [2].
3. National Means-cum-Merit Scholarship Scheme (NMMSS): Targeting economically weaker students to pursue secondary education by reducing the drop off from class 8th, this scheme was launched in 2008. Every year, one lakh scholarships are disbursed to selected students directly to their bank accounts by DBT through PFMS [3].
4. PM Young Achievers Scholarship Award Scheme for Vibrant India for OBCs and Others (PM-YASASVI) Scheme: Financial assistance is provided to students of specific categories (OBC/EBC/DNT) in their pre-matriculation or secondary stage. Government school students of class 9th and 10th grades can avail an allowance of INR 4000 annually. Once the applications are verified, states and union territories are advised to make the payment through Direct Beneficiary Transfer by September every year [4].
Most scholarships in India are now being applied through the National Scholarship Portal (NSP) and provide monthly/annual grants after due diligence of the applications meeting the eligibility criteria [5]. Considering the digital transformation taking place, many of these scholarships are now disbursed through DBT, ensuring direct transfer to the recipient’s bank account, but through intermediaries such as implementing agencies like state governments, educational institutions, etc.
Challenges in the current process
Despite disbursing the funds through DBT, many issues persist with the current schemes in making sure that the scholarships are catering to the objectives for which they were meant to be.
- Delay in real-time fund movement: Multiple levels of approvals and verifications can be a bottleneck in the amount of disbursement. Since a real-time settlement system is absent, it becomes difficult to track the funds and ensure timely support.
- Inefficient tracking of fund utilization: Actual intention of fund allocation remains unverified, as the disbursed funds can’t be tracked. A scholarship, which was meant to be used for tuition or school stationery, can be easily misused for personal expenses.
- Identity fraud for mis-consumption of funds: Loopholes in beneficiary verification can result in fake/duplicate applications that are unidentified. Weak document checks, decentralized databases that are not linked with national identity systems like UIDAI, can help fraudulent/ineligible individuals receive funds. In a recent study on scholarship requests for 2022-23 of 25.5 lakhs applicants, 6.7 lakhs were non-existent, showcasing the potential of scholarship scams happening in India [6].
- Corruption: Unauthorized intermediaries can interfere with the application and disbursement process, creating numerous possibilities of fraudulent activities. Manipulated enrolment details, misreported demographic details, bribes, etc., create severe accountability concerns as well.
- Poor reconciliation: Absence of a centralized platform to track the fund flow & utilisation will create frequent mismatches between multiple departments/ financial intermediaries involved. Hence, the audit trail becomes complex and very slow in error correction.
CBDC as a solution
Central Bank Digital Currency (CBDC) is a digital form of legal tender issued and regulated by the central bank, which is the Reserve Bank of India (RBI) in India. Functionally, CBDC works very similarly to physical cash, but by retaining a digital form backed by distributed ledger technology. CBDC can act as a catalyst for the transformation of money transactions to a more transparent and efficient monetary system. It is created in such a way that the tokens are programmable, traceable, which helps in instant settlements. Hence, CBDC can create a significant impact in the scholarship schemes available to the public by streamlining the payments and enhancing transparency.
1. Direct Transfers and reduced fraud: All intermediaries can be eliminated by direct transfer of funds to the digital wallets of students. This can lead to a significant reduction in the administrative costs associated. This will expedite the payments, ensuring prompt delivery of funds and reducing delays. One-time verification of student details along with bank and UIDAI will help in collating the student wallet details for instant transfers. By doing this, duplicate or ineligible claims can also be avoided.
2. Programmable: Specific use cases can be set for the funds to ensure it is not misused. Geofencing, or the purpose of purchase, or period, can be programmed while issuing the amount so that the scholarship will be used for the objective set by the government. Once this transaction is done, consecutive payments can be made by the merchants as these will be normal CBDC tokens at their end.
3. Real-time audits & Transparency: All the tokens issued are traceable by the government, which makes sure that the amount is compliant with all regulatory requirements. Disbursements are also monitored and tracked for better fiscal planning. Any misconduct will be easily identified, which can help take instant action on further processes.
4. Better financial inclusion: A wider population can have access to all scholarship schemes, even if they don’t have access to traditional banking services. People from remote locations or rural areas can make use of this opportunity in case they are eligible. Also, a personal digital wallet will be more convenient than a bank account for managing transactions.
5. Chances of data-driven decision making: Valuable insights can be made from the analysis of scholarship usage details and recipients’ demographics. Areas of improvement can be identified to serve the student needs, allowing better planning and program designing, streamlining the objectives and operations.
A New Era for Public Welfare Delivery
CBDC opens numerous opportunities to revolutionize the monetary system of the country across industries. Integrating it into the scholarship schemes is something which India, as a country in the pilot stage of digital currency adoption, should look into. This movement will not only boost transparency and accountability but will also empower students who rely on financial support for higher education.
References
- Nic, L. P. (n.d.). Department of Higher Education | Government of India, Ministry of Education. https://www.education.gov.in/scholarships-education-loan-0
- PM Scholarship Scheme (PMSS) | Department of Ex-Servicemen Welfare | Ministry of Defence | Government of India. (n.d.). https://www.desw.gov.in/prime-ministers-scholarship-scheme-pmss
- Nic, L. P. (n.d.-b). National Means-Cum-Merit Scholarship Scheme | Ministry of Education, GOI. https://dsel.education.gov.in/scheme/nmmss
- Justice, S. (n.d.). PM YOUNG ACHIEVERS SCHOLARSHIP AWARD SCHEME FOR VIBRANT INDIA FOR OBCs AND OTHERS (PM -YASASVI) | Department of Social Justice and Empowerment – Government of India. https://socialjustice.gov.in/schemes/101
- Online Scholarships: Fulfilling educational aspirations of students| National Portal of India. (n.d.). https://www.india.gov.in/spotlight/online-scholarships-fulfilling-educational-aspirations-students#:~:text=Launched%20by%20Hon’ble%20Prime%20Minister%20of%20India%2C,Project%20under%20the%20National%20e%2DGovernance%20Plan%20(NeGP).
- Shahin, M., & Shahin, M. (2025, April 14). Scholarship scam: Why Every student must know this before applying for colleges. Republic World. https://www.republicworld.com/education/what-is-the-scholarship-scam-and-why-should-students-be-worried
