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Aadhaar ­Based Pay a Bad Idea for MGNREGS 


On January 1, the Rural Development Ministry mandated the use of Aadhaar-Based Payment Systems (ABPS) in the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). Despite multiple deadline extensions by the Union government, and numerous memorandums from workers urging the Ministry not to make ABPS compulsory, the decision was implemented.



  • Poverty
  • Government Policies and Interventions
  • Issues Relating to Development


  • Employment
  • Growth and Development

Mains Question:

The design of Aadhaar­-Based Payment Systems can be exclusionary resulting in violations of rights. Analyse in the context of the recently mandated use of Aadhaar-Based Payment Systems (ABPS) in the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). (15 Marks, 250 Words).

Mode of Payments Under MGNREGA:

The MGNREGS has two modes of wage payments: account-based and ABPS.

Account- based:

In the former, wage transfers rely on workers’ name, bank account number, and the IFSC code of the bank branch.


  • On the other hand, ABPS requires a few additional steps. Initially, a worker’s Aadhaar number must be linked to their job card by verifying the job card details with the Aadhaar database.
  • Successful authentication requires a match in all details, including spelling and gender, between the job cards and the Aadhaar database. Subsequently, the worker’s Aadhaar must be connected to their bank account.
  • Finally, the Aadhaar number of each worker must be accurately mapped through their bank branch using a software mapper from the National Payments Corporation of India, acting as a clearing house for ABPS.
  • The Aadhaar number serves as the financial address, and the transferred funds are deposited into the last Aadhaar-linked bank account.

Analysing the ABPS:

  • The government contends that the implementation of Aadhaar-Based Payment Systems (ABPS) would address issues like duplicate job cards, alleviate delays in wage payments, and decrease payment rejections.
  • However, beyond its utility in identifying duplicates, the other purported benefits seem to lack solid justification.
  • Any inaccuracies in the ABPS process result in adverse consequences for the worker, such as denial of work, non-receipt of wages, or payment into an undesired account.
  • As a consequence, workers are forced to expend significant amounts of money and endure several days of income loss.
  • Notably, the process of eliminating duplicates itself is prone to errors, with no publicly available audits on the deletion procedures followed by officials or a valid scientific evaluation of the gains from such actions.
  • Contrary to the government’s claims, recent research papers published in Economic and Political Weekly reveal instances where officials deleted job cards due to pressure from the Union government to achieve 100% Aadhaar seeding targets.
  • Given that different administrative units are responsible for creating various documents in rural areas, spelling discrepancies are common.
  • The Unique Identification Authority of India (UIDAI) itself has certified that only biometrics are accurately captured, while demographic details are subject to the discretion of local officials
  • Studies on ABPS also offer compelling proof of inflated savings assertions attributed to Aadhaar. In response to an inquiry in the Lok Sabha, the Rural Development Ministry disclosed a 247% surge in job card deletions during FY 2022–23 compared to previous years, resulting in the deletion of job cards for over 7 crore workers in the last two years alone.
  • According to the government’s own data as of January 11, 2024, out of a total of 25.6 crore registered workers, only 16.9 crore workers qualify for Aadhaar-Based Payment Systems (ABPS), while all workers are eligible for account-based payments.

Working Paper from the Public Research and Advocacy Group Libtech:

  • The paper claims that “there is no significant gain with ABPS vis-à-vis bank account payments, and it is just 3% more in case of ABPS… keeping the scale of Mahatma Gandhi NREGS, this 3% gain is also a very significant gain.”
  • The paper examines, based on a sample of 3.2 crore wage transactions, whether there is a statistically significant difference in the time required to transfer wages using account-based payments and Aadhaar-Based Payment Systems (ABPS).
  • If one were to consider all transactions using the two payment modes and observe that ABPS was faster than account-based payments by 3%, then the Rural Development Ministry’s claims of ‘gains’ might be considered a valid point. However, LibTech’s study is grounded in a sample of 3.2 crore transactions.
  • In statistical science, the principles governing sample datasets dictate that only if the difference is statistically significant can we assert that one payment system is more efficient than the other. Unfortunately, the observed difference was not statistically significant, providing evidence that ABPS is not quicker than account-based payments.
  • The government has asserted that rejection rates in Aadhaar-Based Payment Systems (ABPS) are lower compared to account-based payments. However, the paper finds no statistically significant difference in rejection rates between the two payment modes.
  • In summary, the paper contradicts the Ministry’s repeated claims of increased efficiency in wage payments through ABPS.


The timely payment of workers is primarily dependent on the government allocating sufficient funds.  When adequate funds are allocated, the time taken to pay workers will not differ, whether using ABPS or account-based payments. The challenges in resolving issues with ABPS are considerably greater than those associated with account-based payments, leading us to advocate for the use of account-based payments.

February 2024