Aadhaar | MGNREGA | Wage Payments

Debating the Efficiency of Aadhaar-Based Payment System Under MGNREGA

The Aadhaar-Based Payment System (ABPS) has become a topic of national debate since it was made mandatory for MGNREGA wage payments starting January 1, 2024. While the government touts its transparency and efficiency, recent studies question its actual effectiveness, especially when compared to traditional bank-based payments.

💡 What is ABPS?

• Introduced in 2016 as an optional wage disbursal mechanism
• Made mandatory in 2024 under MGNREGA
• Links workers’ Aadhaar number to their job cards and bank accounts
• Aims to reduce corruption and streamline payments

📊 Study Insights: ABPS vs Traditional Bank Payments

A recent study from the Indian Journal of Labour Economics, based on over 3 crore MGNREGA transactions, revealed:

➡️ Key Finding: There’s no significant difference in efficiency between the two systems.

🚧 Challenges for Workers

• Misdirection of wages due to mismatched Aadhaar and job card details
• Deletions from the system causing temporary exclusion from payments
• Centralised grievance resolution in ABPS makes it harder to fix issues compared to local bank branches

🔄 The Complex Payment Journey

To use ABPS, workers must:

1. Link Aadhaar to job card
2. Link Aadhaar to bank account
3. Ensure correct mapping with NPCI (National Payments Corporation of India)

⚠️ Result: Many workers struggle with technical and bureaucratic hurdles, delaying or misrouting payments.

🏛️ Government’s Viewpoint

• Claims ABPS ensures better transparency
• Believes Aadhaar-linkage improves monitoring and fund tracking
• Attributes payment delays more to funding issues than technology

📌 ABPS in the Larger Context

ABPS is a component of India’s Aadhaar Enabled Payment System (AePS), promoting financial inclusion through biometric verification.
AePS functions include:

• Cash withdrawals and deposits
• Fund transfers
• Balance enquiries
• Mini statements
• Aadhaar seeding status check

🚨 Technical Issues and Exemptions

• Exemptions granted in areas with technical failures
• Critics argue ABPS could exclude vulnerable populations like the elderly, illiterate, or remote rural residents
• Opposition parties and civil rights groups are demanding greater flexibility in payment systems

🧩 The Road Ahead

While digitisation is essential, the findings show that ABPS is not a silver bullet.
✅ For better outcomes, the focus must be on:

• Adequate and timely funding
• Simplified grievance redressal
• Local problem-solving
• Worker training and awareness

Efficiency is not just about systems—it’s about accessibility, inclusion, and real impact on lives.