Studies show leakages from Aadhaar-linked Direct Benefit Transfer (DBT)

A campaign called Rethink Aadhaar has published a report highlighting the ease with which Aadhaar has enabled scams to perpetuate in the form of DBTs.

The “Aadhaar Payments Bridge System” (APBS), the payment mode used for Aadhaar-based Direct Benefit Transfers (DBT), has altered the way in which money is transferred from the Consolidated Fund of India to the bank account of an individual beneficiary, by adding additional layers to the transaction, with no additional checks for transparency or accountability. While there are some merits of online payments, the process of transition from the older system of DBT and the APBS technology itself needs more scrutiny.

In the older system of Direct Benefit Transfers, conducted through a NEFT transaction, the Reserve Bank of India was the sole “middle layer” between banks. In contrast, in the new system of APBS, the National Payments Corporation of India (NPCI), a private organisation, operates as the “clearing house,” using the "Aadhaar Payments Bridge System".

Under the Aadhaar Payments Bridge System, Aadhaar numbers replace bank accounts as the “financial address” of the beneficiary. The “Aadhaar mapper,” created and managed by the NPCI, links the Aadhaar number to the bank account number, to facilitate the transfer of incoming funds. However, this linkage is done arbitrarily to the “last linked” bank account, and with no way of checking whose account it is. Although beneficiaries’ consent is supposed to be a prerequisite to this linking or mapping”, it is totally absent in practice, leaving beneficiaries in the dark about which accounts have been created in their names or linked to their Aadhaar numbers.

The list of bank accounts and the Aadhaar number associated with it is available with NPCI alone. Thus, there is no way a particular beneficiary may know of which of his/her accounts – even if it is his/her account – that is being used.

In addition, there have been Aadhaar linkage-based technical errors that have proven costly for several. Roughly one in twenty wage payment transactions get rejected due to technical errors such as incorrect account number or incorrect linking of Aadhaar with bank accounts, as per media reports.

During the lockdown, Aadhaar put to question especially the efficacy of the PDS. In Odisha, according to The Hindu, inordinate delay in adding names of newly married women to ration cards at their marital homes left many vulnerable women and their children without food security. The massive scholarship scam in Jharkhand, where many poor students were deprived of their scholarships owing to a nexus of middlemen, government officials, banking correspondents and others. As per an investigation done by the Indian Express, the newspaper has claimed to have uncovered a nexus of middlemen, government employees and bank staff who allegedly duped students from minority communities of a centrally funded scholarship scheme in Jharkhand.

The scam was replicated in Assam, Punjab and Bihar, where students received or were able to access only a fraction of the amounts, that were due to them, thanks to a nexus of brokers, bank correspondents, school staff and state government employees. The “LPG scam” was widely reported in 2017. People’s LPG subsidies were diverted, via the Aadhaar-linked DBT process, to unrelated Airtel payment banks that they had no access to. LPG subsidy payments worth Rs 190 crore were allegedly routed to over 30 lakh Airtel payment bank accounts, with some of the accounts even having been opened without informed user consent.

LibTech India recently released a research report, based on a survey of nearly 2,000 MGNREGA workers across Andhra Pradesh, Jharkhand, and Rajasthan conducted in order to understand the last mile challenges. The survey tried to capture the experiences of workers in obtaining MGNREGA wage monies in their hands after they were credited to their bank accounts. Banks in rural areas are often overcrowded. 42 per cent of people in Jharkhand and 38 per cent in Rajasthan took more than four hours to access wages from banks. However, this was just 2 per cent in AP. Overall, an estimated 45 per cent had to make multiple visits to the bank for their last transaction. It also costs a lot of expenses for MGNRGA workers to make multiple visits to bank to obtain their weekly wage funds.

A technological intervention must have a governance framework in which protection of rights must be fundamental. DBT framework requires strengthening of the grievance redressal processes and setting of accountability norms for all payment intermediaries.

( V Venkateswara Rao is an alumnus of IIM, Ahmedabad and a retired corporate professional.)