Cash transfer hurdles for NREGA workers

The government should do an honest assessment of the utility of the Aadhaar-based payment system and ensure safeguards in welfare transfers through private payments banks

Finance Minister Arun Jaitley recently wrote a blog on the virtues of Aadhaar. Timed with the introduction of a bill in Parliament to enable private companies to access people’s Aadhaar details (prohibited by the Supreme Court in a ruling in September 2018), it reiterates how Aadhaar has helped to save Rs 90,000 crore. He also argues that Aadhaar-based payment of welfare benefits (loosely referred to as “direct benefit transfer” or DBT) has removed middlemen and ensured direct payment of subsidies into people’s bank accounts. He seems unbothered with the fact that the claims of savings have never stood any scrutiny. 

The experience of DBT-based wage payments in the National Rural Employment Guarantee Act (NREGA) in Jharkhand stands contrary to the finance minister’s claims. Since 2017-18, almost all NREGA wage payments of the state were made through DBT. This mode of wage payments has not only contributed to delays and uncertainties in payments, but is also responsible for non-payment in many cases. 

For making DBT payments, a person’s Aadhaar-seeded bank account has to be mapped with her Aadhaar at the National Payment Corporation of India (NPCI). The NPCI, a private entity, acts as a bridge between the payment agency and the payee bank that directs a person’s subsidy amount to the bank last mapped with her Aadhaar. The bank then credits the money to the account seeded with that Aadhaar. 

According to official data, NREGA wages worth Rs 170 crore were rejected for Jharkhand's workers in the last four years, because of errors in mapping of Aadhaar at NPCI or seeding it with bank accounts and other technical reasons. Out of these total rejections, payment of around Rs 1 billion is still pending. Another common issue faced by workers is that of diverted payments. In a rush to meet account-opening targets in Jan Dhan Yojana, many workers who already had a bank account were made to open another account linked to their Aadhaar, usually without their knowledge.

Since there is no system of informing people about which of their accounts is linked with Aadhaar, workers often search for their wages in the wrong account. At times, wages are even credited to someone else’s account that gets linked with the worker’s Aadhaar due to errors in data entry. If these issues get resolved, workers get paid (although with delays of varying lengths). If not, they remain unpaid.

Issues related to biometric authentication-based electronic know-your-customer (e-KYC) banking norms (made mandatory for NREGA workers) are becoming increasingly common. For instance, in December 2018, Surai Mandi of Dangdug village of Boram block was still waiting, for wages for work done four months ago. To his surprise, in October he found that his wages were not credited in his Bank of India account that he usually operates, but in his ICICI Bank account. Unknown to him, this account was partially frozen by the bank, which only allowed crediting of money in the account, but not any withdrawal.

This account was opened by a private banking vendor, Financial Inclusion Network & Operations payments bank (FINO) in 2012-13. FINO provides ICICI Bank, among other banks, basic banking services such as opening of accounts and withdrawal of cash in areas that are away from bank branches. It functions through a network of banking correspondents (BCs) who use portable Aadhaar-based point of sale (PoS) machines to authenticate the identity of account holders. At some point in the last two years, Surai’s account was seeded with Aadhaar by the BC through an e-KYC process without his knowledge and then linked at NPCI. 

In December, officials at both the FINO head office and the ICICI Bank regional office in Ranchi were unsure about the reason for the partial freezing of Surai's account, but informed that it could be unfrozen only after successful re-verification of the e-KYC norms. Surai's account is yet to be unfrozen, because the e-KYC was rejected by the bank due to a mismatch in the spelling of his name in the ICICI Bank records and his Aadhaar. Several other workers of this block are also unable to withdraw their wages for the same reason. 

The DBT payment system is being encashed by private entities for financial gains at the cost of workers. It is not uncommon for BCs to make workers punch their biometrics in the PoS machine without disclosing the reason for making them to do so. They try to get workers’ accounts linked with Aadhaar to ensure DBT payments in those accounts, as they get a commission from banks on the total value of the financial transactions made through the PoS machine system. Incidents of BCs of various banking vendors charging commission from workers for cash withdrawal are also routinely reported from across the state.

The situation is likely to be similar in other states as well. These are just some of the Aadhaar-related payment issues faced by the poor. Over the past few years, many activists and researchers have highlighted these problems. One hopes that the government wakes up to the mess, does an honest assessment of the utility of the Aadhaar-based payment system and ensures adequate safeguards in welfare transfers through private payments banks. 

The writer works on the National Rural Employment Guarantee Scheme and other welfare programmes in Jharkhand