Aadhaar-Based Payment System (ABPS) Mandatory for NREGS Workers: Govt may Consider Exemptions on Case Basis

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Aadhaar-Based Payment System (ABPS) Mandatory for NREGS Workers: Govt may Consider Exemptions on Case Basis Blog Image

What’s in Today’s Article?

  • Why in News?
  • Aadhar Enabled Payment System (AePS) and its Objectives
  • ABPS for NREGS
  • ABPS Mandatory for NREGS Workers
  • Decision to Exempt in Case of any Technical Issues

Why in News?

  • With the ABPS now mandatory for National Rural Employment Guarantee Scheme (NREGS) workers' payments, the government announced that it may consider exemptions on a "case-by-case basis".
  • The NREGS provides a legal guarantee for 100 days of employment in every financial year to adult members of any rural household willing to do public work-related unskilled manual work at the statutory minimum wage.

Aadhar Enabled Payment System (AePS) and its Objectives

  • AePS is a bank led model which allows online interoperable financial inclusion transactions at PoS (MicroATM) through the Business correspondent of any bank using the Aadhaar authentication.
  • The only inputs required for a customer to do a transaction under this scenario are -
    • Bank Name
    • Aadhaar Number
    • Biometrics captured during enrolment
  • Objectives of the AePS:
    • To empower a bank customer to use Aadhaar as his/her identity to access his/ her respective Aadhaar enabled bank account.
    • To perform basic banking transactions like cash deposit, cash withdrawal, intrabank or interbank fund transfer, balance enquiry and obtain a mini statement through a Business Correspondent
    • To sub-serve the goal of Government of India and Reserve Bank of India (RBI) in furthering Financial Inclusion.
    • To sub-serve the goal of RBI in electronification of retail payments.
    • To enable banks to route the Aadhaar initiated interbank transactions through a central switching and clearing agency.
    • To facilitate disbursements of Government entitlements like NREGA, Social Security pension, Handicapped Old Age Pension, etc.
    • To facilitate interoperability across banks in a safe and secured manner.
    • To build the foundation for a full range of Aadhaar enabled Banking services.

ABPS for NREGS

  • Under Mahatma Gandhi NREGS, ABPS has been in use since 2017. Under ABPS, workers’ 12-digit Aadhaar numbers are linked with their job cards as well as the bank accounts of NREGS workers.
  • After almost universal availability of Aadhaar numbers to every adult population, the Government of India decided to extend ABPS for beneficiaries under the scheme.
  • The payment will land through ABPS only to the account associated with ABPS, which means that it is a safer and faster way of payment transfer.
  • Out of the total 14.33 crore active beneficiaries, the Aadhaar has been seeded for 13.97 crore.
  • Against these seeded Aadhaar, a total 13.34 crore Aadhaar have been authenticated and 81.89% of active workers are now eligible for ABPS.
  • In the Month of July 2023, about 88.51% of the wage payment has been made through ABPS.

ABPS Mandatory for NREGS Workers

  • The system was first made mandatory (by the Rural Development Ministry) with effect from Feb 1 2023 but, through several extensions, the Centre allowed it until Dec 31 2023.
    • With no extension granted to states beyond Dec 31, the ABPS became mandatory from Jan 1 2024.
  • The mixed route of ABPS and National Automated Clearing House (NACH) - an interbank system, will be used for bulk payments such as subsidies and salaries.
  • The wage payment of unskilled workers through ABPS ensures the payment of beneficiaries into their bank accounts, even in case of frequent change of bank account by the beneficiary.

Decision to Exempt in Case of any Technical Issues

  • In case, if any gram panchayat is having either technical problem or Aadhaar-related problem, the Government of India may consider exemption from ABPS on case-by-case basis till the resolution of the issue.
  • The announcement came after the opposition parties attacked the Government, calling the ABPS a cruel New Year gift to exclude crores of the poorest and marginalised Indians from earning a basic income.
    • They accused the government of “weaponizing technology, especially Aadhaar”.

Q1) What is the National Automated Clearing House (NACH) system?

NACH is a centralised system which is implemented by the National Payments Corporation of India (NPCI) for financial institutions, corporate and government as a web-based solution for the facilitation of interbank, high volume electronic transactions.

Q2) What is the National Automated Clearing House (NACH) system?

NPCI is an umbrella organisation for operating retail payments and settlement systems in India. It is an initiative of RBI and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act 2007, for creating a robust Payment & Settlement Infrastructure in India.


Source: NREGS payments: Aadhaar-based system mandatory now, Govt says may consider exemptions on case basis