The ambitious Pradhan Mantri Jan Dhan Yojana (PMJDY) aims at bringing millions of rural Indians within the financial mainstream by opening bank accounts. In 2006, the Reserve of India, recognising that a majority of rural Indians had little or no access to banking services, allowed banks to use third-party, non-bank agents to extend their services right to people’s doorsteps.

It recently issued draft guidelines for those seeking a license to set up a payments or small banks as part of its efforts to expand banking services to more households.

While these are welcome steps, it would be prudent to look at the existing experiences of beneficiaries and service providers with respect to large-scale social schemes such as MGNREGA and Social Security Pensions, including those through bank accounts. In 2013-14 alone, unpaid wages under MNREGA amounted to ₹4,800 crore (according to the official data).

Banking correspondents (BCs) and branch post masters (BPMs) who work as extensions of banks and post offices respectively, provide banking services, particularly cash.

While these third parties have been envisaged to function as an ultra small branch, their lack of financial discipline, record maintenance and capacity to disburse wages on a large scale brings in opportunities for deviation, as seen in social audits in Andhra Pradesh.

The cash gap In a regular banking set-up, reconciliation of accounts occurs on a daily basis; post offices keep track of cash flow through passbooks. But here, BCs and BPMs withdraw the requisite amount from the banks and carry huge volumes of cash in bags to distribute to the beneficiaries.

The cash remains idle with them in their homes until it is dispensed. There have been cases of people running away with the money or faking burglaries.

Wage-seekers have consistently reported that they are sometimes not paid for weeks and months. The BCs, CSPs (community service providers) and VOs (village organisations) keep deferring payment, saying the cash has not arrived, and often pay less than the entitlement.

Thus, despite money being credited to the bank accounts of the beneficiaries, the core challenges remain. Cash payments have been replaced by biometric payments. Often the biometric system does not offer a match or recognise the fingerprints of the wage-seekers as their fingers are calloused due to rigorous manual labour. In such cases, people are either turned away or manual override is exercised through a one-time password (OTP) and another layer of human intervention is added to disburse wages.

Plain manipulation There have also been cases of service providers who manipulate the system to pocket money by taking authentication on the point of sale (POS) machines from the wage-seekers, but making excuses such as lack of mobile connectivity or unavailability of cash.

Or they take multiple fingerprints claiming the system has not registered the same, hence avoiding payment.

In reality, once the fingerprint has been taken, authentication gets done and the system shows payment as completed. Both banks and the postal department use fingerprint authentication to acknowledge payments have been made; yet they simultaneously refuse to accept that the labourer has been cheated. There is also a practice of taking single biometric authentication for multiple weeks of payments. This makes it impossible for the labourers who are unlettered to understand how many weeks of payment they are receiving or are supposed to receive.

Opening bank accounts does not guarantee that the money will reach the beneficiaries. Therefore, the issue of that last mile delivery needs to be addressed.

Governor Raghuram Rajan should shift the focus from merely distribution of currency to monitoring whether payment agencies are delivering and holding them accountable. To give ‘ jan-dhan ’ real meaning, the payment system should be made more transparent, accountable and robust, which factors in grassroots issues.

The writers are with the Society for Social Audit, Accountability & Transparency, governments of Andhra Pradesh and Telangana

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