- Why in news
- On 14 August 2026, the Centre launched CBDC-based Direct Benefit Transfer under PMGKAY in Chandigarh and Dadra & Nagar Haveli. Food subsidy now goes into beneficiaries' Digital Rupee wallets.
- What it is
- PMGKAY gives free foodgrains to eligible households under the National Food Security Act. The Digital Rupee (e-rupee) is India's Central Bank Digital Currency, issued by the RBI as legal tender. In this model the food subsidy is credited as purpose-bound tokens in a CBDC wallet and spent at empanelled merchants.
- Where launched
- Chandigarh and Dadra & Nagar Haveli are the first State/UT to transfer the subsidy to all eligible PMGKAY beneficiaries as CBDC tokens.
- Earlier pilots
- Pilots ran in Gujarat (15 Feb 2026) and Puducherry (26 Feb 2026).
- Access
- Smartphone users pay by QR code; feature-phone users use OTP-based access.
- Firsts
- It is the first large-scale use of CBDC in Central Government welfare programmes.
- JAM base
- JAM stands for Jan Dhan accounts, Aadhaar and mobile phones; the Secretary cited over 59 crore Jan Dhan accounts.
- Issuer
- The Digital Rupee is issued by the Reserve Bank of India.
- Launch date and places
- CBDC-based DBT under PMGKAY will start on 14 August 2026 in Chandigarh and Dadra & Nagar Haveli.
- First UTs
- They will be the first UTs to transfer food subsidy to all eligible PMGKAY beneficiaries as programmable CBDC tokens.
- How it works
- Subsidy goes to CBDC wallets instead of bank accounts and is spent on foodgrains at empanelled merchants.
- Issuer of CBDC
- The Digital Rupee is issued by the Reserve Bank of India as legal tender.
Don’t confuse with CBDC vs UPI: CBDC is legal tender issued by the RBI. UPI is a payment system run by NPCI that moves bank money.
Don’t confuse with PMGKAY vs ONORC: PMGKAY gives free foodgrains. ONORC is portability that lets beneficiaries draw ration anywhere in India.
Don’t confuse with CBDC vs cryptocurrency: CBDC is legal tender backed by the RBI; private cryptocurrencies are not.
Economy terms and data: 42 Prelims questions since 2013, rising in recent years; they test what a term or instrument means. In Mains, 12 news-triggered questions.
Why it matters
- Programmable, purpose-bound money can cut leakage and diversion in PDS.
- Builds on JAM and Digital Public Infrastructure; tests CBDC in welfare delivery.
- Traceable, real-time subsidy use can cut leakage and diversion in the food subsidy system.
- Tests the Digital Rupee in welfare delivery and builds on Digital Public Infrastructure.
Problems
- Digital literacy, phone and network access for poor and elderly beneficiaries.
- Merchant onboarding, privacy of traceable transactions and risk of exclusion.
- Beneficiaries need smartphones, digital literacy and connectivity, and merchants must be onboarded.
- Privacy and data protection concerns arise from traceable transactions.
Way forward
- Scale in phases using lessons from the four pilots, with offline options.
- Strengthen grievance redressal and data protection.
- Scale in phases after evaluating pilot results, with assisted access for the digitally excluded.
- Add privacy safeguards and a grievance redress system.
Put in your answer
DBT savings: The Minister said DBT has saved over ₹4 lakh crore by reducing leakages.
CBDC-DBT as welfare example: Chandigarh and Dadra & Nagar Haveli show programmable CBDC used for food subsidy, with the aim of reducing leakages.
- 2026Mains GS3 · Q1Define Digital Rupee; explain CBDC working and progress in India.
- 2015Mains GS3 · Q5How DBT replacing price subsidy could change India's subsidy scenario.
- 2022Mains GS2 · Q8Comment on DBT as progressive reform with its limitations.
- 2026Prelims Q90Which statement about UPI and Digital Rupee settlement is incorrect?
- 2024Prelims Q53Which statements about the digital rupee are correct?
- 2017Prelims Q43Likely consequence of implementing UPI for direct subsidy transfers?
- 2023Prelims Q72Whether CBDC payments avoid SWIFT and can carry programmed spending conditions
UPSC’s own questions that come close to this issue, from our Prelims and Mains banks.
Prelims practice · Statements
Ours, not from a UPSC paper
Consider the following statements:
- 1.Under the CBDC-based Direct Benefit Transfer for PMGKAY, the food subsidy is credited to the beneficiary's Digital Rupee wallet instead of a conventional bank account.
- 2.Feature-phone users cannot use the CBDC-based facility because it depends on QR code scanning.
- 3.The Digital Rupee is issued by the National Payments Corporation of India.
Which of the statements given above is/are correct?
True or false?
1 of 14
Statements the way Prelims prints them. Say first, then see the fact.
1.Under the new system, the food subsidy is credited into the beneficiary's Digital Rupee wallet instead of a conventional bank account.
True. Subsidy goes to a CBDC wallet, not a bank account.
2.Gujarat and Puducherry were the first places where the CBDC-based food subsidy pilot was run.
True. Gujarat (15 Feb 2026) then Puducherry (26 Feb 2026).
3.Feature-phone users cannot use the CBDC-based facility because it needs QR code scanning.
False. Feature-phone users can access it through OTP-based mechanisms.
4.The subsidy received in the CBDC wallet is purpose-bound and can be spent on foodgrains at empanelled merchants.
True. Purpose-bound use for foodgrains at empanelled merchants.
5.The Digital Rupee is issued by the National Payments Corporation of India.
False. The Digital Rupee is issued by the RBI.
6.The JAM trinity refers to Jan Dhan accounts, Aadhaar and mobile phones.
True. JAM = Jan Dhan, Aadhaar, Mobile.
7.PMGKAY foodgrains are provided under the National Food Security Act, 2013.
True. PMGKAY operates on NFSA-eligible households.
8.Under the new model, eligible PMGKAY beneficiaries receive the food subsidy in their CBDC wallets instead of conventional bank account transfers.
True. Subsidy is credited as CBDC tokens into wallets.
9.Chandigarh and Dadra & Nagar Haveli are the first Union Territories to transfer PMGKAY food subsidy to all eligible beneficiaries as programmable CBDC tokens.
True. They are the first UTs for full coverage in this form.
10.The rollout in these Union Territories follows earlier pilots in Puducherry and Gujarat.
True. Pilots were held in Puducherry and Gujarat.
11.The Digital Rupee is issued by the Securities and Exchange Board of India.
False. The Reserve Bank of India issues the Digital Rupee.
12.Beneficiaries can spend the CBDC subsidy only by withdrawing cash from ATMs.
False. They buy foodgrains from empanelled merchants through digital payment.
13.The Digital Rupee is a legal tender, a digital form of the Indian rupee issued by the central bank.
True. CBDC is sovereign currency in digital form.
14.The release describes the rollout as a proof of concept intended to remain limited to these two Union Territories.
False. It is envisaged as a scalable template for adoption by other States and UTs.
Written by us from the release, not by UPSC; checked by a second model.
Mains practice
15 marks · 250 words
The Centre has launched a Central Bank Digital Currency (CBDC)-based Direct Benefit Transfer for food subsidy under PMGKAY in Chandigarh and Dadra & Nagar Haveli, after pilots in Gujarat and Puducherry. Examine the features of this model and discuss its significance and the challenges in scaling it up as a way of delivering welfare benefits in India.
Source: PIB, Ministry of Consumer Affairs, Food & Public Distribution, 14 Aug, 19:04 IST · Release 293514
Worth revising until Prelims 2028: most news questions come within two years of the event.