Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
From UPSC perspective, the following things are important:
Prelims level: Read the attached story
Mains level: Problems marginalized section is facing due to diversion of payments under direct benefit transfer
Poor are facing problems due to diverted payments and aadhar based payment system.
- The mass diversion of LPG subsidies to Airtel wallets that came to light in 2017.
- Many of the wallets were unwanted, or even unknown to the recipients. Those affected, fortunately, included millions of middle-class Airtel customers who protested when the goof-up emerged.
What is diverted payments?
- This is an instance of what might be called “diverted payments” — bank payments being redirected to a wrong account, without the recipient’s consent or knowledge.
- diverted payments have become a widespread problem in recent years, not so much for the middle class as for powerless people such as old-age pensioners and Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) workers.
- The main culprit is the Aadhaar Payment Bridge System (APBS).
- The basic idea of the APBS, an offspring of the National Payments Corporation of India (NPCI), is that a person’s Aadhaar number becomes her financial address.
- Instead of having to provide multiple account details (say, her name, bank account number and IFSC code) to receive a bank transfer, she only has to provide her Aadhaar number.
Introducing Bank account into ABPS
- Induction of a bank account into APBS involves two distinct steps, both of which are meant to be based on informed consent.
- First, the account must be “seeded” with the customer’s Aadhaar number.
- Second, it must be connected to the NPCI mapper — a step known as “mapping”.
- In cases of multiple accounts for the same person, the APBS automatically sends money to the latest-mapped account.
- When the Jan Dhan Yojana (JDY) was launched Aadhaar numbers were seeded into these accounts without proper verification.
Problems and challenges with ABPS
- Haphazard seeding continued well beyond 2014 because the government wanted to bring all direct benefit transfer (DBT) payments — pensions, scholarships, subsidies, MGNREGA wages, and so on — under the Aadhaar payments umbrella.
- Thus the groundwork required for APBS to work — reliable seeding of bank accounts with Aadhaar — had simply not been done when the APBS was rolled out.
1.Problems with E-KYC
- The seeding mess, it seems, was sought to be cleaned up by making “e-KYC” compulsory.
- To enforce e-KYC, many banks used the “ultimatum method”: a deadline was set, and people’s accounts were blocked when they missed the deadline.
- Compulsory e-KYC became a nightmare for poor people, for a number of reasons:
- Some did not know what they were supposed to do.
- Others had problems of biometric authentication.
- Others still struggled with inconsistencies between the Aadhaar database and the bank database.
- Among the worst victims were old-age pensioners.
- To this day, in Jharkhand, many pensioners are struggling to understand why their pension was discontinued after e-KYC was made compulsory.
2.Forcing of ABPS
- APBS was forced on millions without consent.
- Mapping (the induction of an Aadhaar-seeded account into the APBS), according to NCPI and UIDAI guidelines, should be based on an explicit request from the customer.
- This gives a measure of protection to educated middle-class customers. It ensures, for instance, that they know which account their money is being directed to by the APBS.
- For poor people, however, consent is a fiction.
- In Jharkhand at least, bank accounts have been mass-mapped onto the APBS without any semblance of consent.
Impact of diverted payments
- The result of this premature and coercive imposition of the APBS is that diverted payments have become a serious problem in Jharkhand.
- For example, recent victims include Premani Kunwar, an elderly widow in Garhwa district who died of hunger on December 1, 2017, two months after her pension was diverted by the APBS to someone else’s account.
- Others affected are MGNREGA workers.
- Already discouraged by delays in wage payments, they have to contend now with diverted payments and other pathologies of the APBS.
Other Problems with ABPS
- rejected payments — another nightmare for powerless DBT recipients.
- Second, these problems are magnified by a pervasive lack of accountability.
- When people have problems of diverted or rejected payments, they have no recourse.
- Third, none of this seems to perturb the agencies that are promoting the APBS and related financial technologies.
- nobody appears to be in charge of enforcing the consent norms and other “guidelines” issued by the NPCI.
The RBI may be the nominal regulator, but the real action is at the NPCI, the UIDAI and other strongholds of the Aadhaar lobby.The UIDAI did take cosmetic damage control measures from time to time in the last two years. Judging from Jharkhand’s experience, however, the pathologies of the APBS continue to cause havoc on the ground. An independent and participatory review of the system is long overdue.