Context:

• The Rural Development Ministry made Aadhaar­Based Payment Systems (ABPS) mandatory in the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). 

Definition: 

• ABPS is meant for recurring payments done by the government to the beneficiaries for various subsidies as well as direct benefit transfer. 
• Here the beneficiary is identified through an Aadhaar number, then NPCI manages an Aadhaar Mapper where the Aadhaar number is mapped to a specific bank account and the money flows to the connected bank account.
• This system is also known as Aadhaar Payments Bridge System (APBS).
• It is different from Aadhar enabled Payment System(AePS), which is a bank led model which allows online interoperable financial inclusion transactions at PoS (MicroATM) through the Business correspondent of any bank using the Aadhaar authentication.

Process:

• There are two modes of wage payments in MGNREGS: account based system and ABPS. 
• For the account based system, wage transfers use the workers’ name, bank account number, and the IFSC code of the bank branch. 
• For ABPS,
  • First, a worker’s Aadhaar number must be seeded with their job card, which means authenticating her job card details with the Aadhaar database. Authentication is successful only when all the details including spelling and gender in the job cards match with those in the Aadhaar database. 
  • Second, their Aadhaar must be linked to their bank account. 
  • Third, the Aadhaar number of each worker must be mapped correctly through their bank branch with a software mapper of the National Payments Corporation of India, which acts as a clearing house of ABPS. 
  • The Aadhaar number acts as the financial address and cash transferred gets deposited to the last Aadhaar­linked bank account. 
  • Incorrectness in any of the above steps for ABPS means that the worker is denied work, does not receive wages, or is not paid in their preferred account. 

Benefits of ABPS:

• Reduced leakages and better targeting: Proponents argue that ABPS, by linking Aadhaar with bank accounts, reduces the risk of ghost beneficiaries and ensures subsidies reach intended recipients.
• Increased transparency: The system aims to offer greater transparency in fund transfers, allowing for easier tracking and monitoring.
• Financial inclusion: Linking Aadhaar and bank accounts can promote financial inclusion, especially for those without formal banking access.
• Efficiency: ABPS could streamline payment processes and reduce administrative costs.

Issues with ABPS in MGNREGS

• Exclusion: Many eligible workers are excluded due to data inconsistencies or lack of Aadhaar linking, undermining the inclusivity goal. 
  • Only 16.9 crore out of 25.6 crore registered workers are eligible for ABPS due to various requirements, excluding many from the scheme.
• Data accuracy concerns: Errors in Aadhaar data and job card details create significant problems for workers and hinder smooth implementation.
• Questionable efficiency: Studies show that there is no statistically significant advantage in terms of payment speed or rejection rates compared to account-based payments.
• Additional burden on workers: Fixing technical glitches and data errors can be time-consuming and expensive for workers, as they need to travel at loss of job to identified centres. This negates potential efficiency gains.

A thorough assessment considering both sides of the argument is crucial for informed decision-making. Since ABPS has been made mandatory, now the focus should be on streamlining the systems to ensure no beneficiary is left behind.