Aadhaar-Based Payment System (ABPS) for MGNREGA: Efficiency, Challenges, and Future Prospects

Current Affairs National

Posted by newadmin on 2025-01-26 09:24:41 |

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The Aadhaar-Based Payment System (ABPS) has become a significant topic of discussion in India, especially since its mandatory implementation for wage payments under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) starting January 1, 2024. The system aims to enhance the efficiency and transparency of wage disbursements. However, recent studies have raised concerns about its effectiveness when compared to traditional bank account methods.

Overview of Aadhaar-Based Payment System (ABPS)
ABPS links wage payments directly to workers’ Aadhaar numbers, requiring the Aadhaar number to be linked with both job cards and bank accounts. Introduced in 2016 as an optional system, ABPS was later made mandatory to streamline payments and reduce delays in disbursement.

Study Findings on Payment Efficiency
A study published in the Indian Journal of Labour Economics analyzed over 3 crore MGNREGA transactions and found no significant difference in the timeliness of wage payments between ABPS and traditional bank accounts. Approximately 39% of ABPS payments were processed within seven days, compared to 36% for bank accounts. Payment rejection rates were also similar, with ABPS at 2.1% and traditional bank accounts at 2.85%.

Challenges Faced by Workers
Despite the system’s intent to simplify payments, workers have reported challenges such as wage misdirection and exclusion from the payment system due to mismatches between job card details and Aadhaar numbers. The centralized nature of ABPS complicates the resolution of such issues, whereas localized problems with traditional bank payments can often be addressed more quickly.

Complexity of the Payment Process
The ABPS system requires workers to complete several steps, including linking their Aadhaar number to their job card and bank account. This process involves coordination with the National Payments Corporation of India (NPCI) for accurate mapping. The complexity of these steps can cause delays and confusion among workers, further complicating wage disbursement.

Government’s Justification for ABPS
The government justifies the ABPS by arguing that it improves transparency, reduces corruption, and ensures faster payments. While these claims are made, the study suggests that the real cause of delays lies not in the payment system itself, but in inadequate funding and resources.

Future of ABPS and Financial Inclusion
ABPS is part of a larger initiative to promote financial inclusion in India. Through the Aadhaar Enabled Payment System (AePS), the government aims to facilitate basic banking transactions using Aadhaar, including cash deposits, withdrawals, and fund transfers. The goal is to expand the reach of financial services to more people, particularly in rural areas.

Exemptions and Technical Issues
In response to criticism, the government has stated that exemptions from ABPS may be granted in cases where technical issues or Aadhaar-related problems occur. This move addresses concerns raised by opposition parties, who argue that the system could potentially exclude vulnerable populations from essential income.

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