A bridge to nowhere

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Poor people are running from pillar to post as the Aadhaar payment bridge routinely obstructs their welfare benefits

Perhaps you will remember “l’affaire Airtel” — the mass diversion of LPG subsidies to Airtel wallets that came to light in 2017.
The subsidy money was returned, Airtel was fined by the Unique Identification Authority of India (UIDAI), and the world moved on.
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.
What has escaped attention is that 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).

Shaky foundations

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.
To understand the dangers of this “bridge”, we must rewind to 2014, when the Jan Dhan Yojana (JDY) was launched.
In the frantic drive that followed, millions of bank accounts were opened and seeded with Aadhaar in a haphazard manner, under relentless pressure from the Central government.

Given short shrift

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.
Government departments started sending bulk lists of bank accounts and Aadhaar numbers to the banks for accelerated Aadhaar seeding.
Meeting the seeding targets was the top priority and due verification, once again, took the back seat.
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.
The seeding mess, it seems, was sought to be cleaned up by making “e-KYC” compulsory.
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.

A risky bridge

But there is worse: without waiting for the seeding mess to be cleaned up, the 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.
Recent discussions with local managers of 10 different banks spread across Ranchi district revealed that they make no clear distinction between seeding and mapping.
The two steps are essentially conflated, based on default options and symbolic consent — sometimes just a signature on a photocopy of the account holder’s Aadhaar card, or below a consent line printed in English.
The result of this premature and coercive imposition of the APBS is that diverted payments have become a serious problem in Jharkhand.
Others affected are MGNREGA workers who are already discouraged by delays in wage payments, they have to contend now with diverted payments and other pathologies of the APBS.
A recent study of the Indian School of Business (ISB), based on an analysis of more than 10 million payments in 2014-18, concludes that 38% of all the APBS payments of MGNREGA wages in Jharkhand “redirect wages to a completely unrelated account”.
This study should have set alarm bells ringing, but little has been heard of it so far.

Lack of accountability

We end with a few overarching remarks.
First, diverted payments are not the only problem associated with the APBS.
There are others, discussed elsewhere, such as rejected payments — another nightmare for powerless DBT recipients.
Second, these problems are magnified by a pervasive lack of accountability.
Guidelines for resolving payment problems are conspicuous by their absence.
Third, none of this seems to perturb the agencies that are promoting the APBS and related financial technologies.
Similarly, 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.