The government's recent move to make wage payments through banks mandatory for the National Rural Employment Guarantee scheme has caused alarm, with three economists writing to Prime Minister Manmohan Singh and the Reserve Bank of India governor warning them against taking such a step in haste.
Jean Dreze, who is also member of the Central Employment Guarantee Council, Ritika Khera and Anirban Kar - all from the Delhi School of Economics -- have pointed out that though bank payment of wages is seen as a magic solution to delayed payment and non-payment of wages under the Rs 25,000-crore (Rs 250-billion) scheme, making bank payments mandatory is a step taken without necessary precautions.
"These letters are to alert the PMO and RBI to one incidence of fraud in the case of bank payment of NREG Programme wages in Deoghar (Jharkhand) and to urge them to take this matter seriously," Khera said.
Referring to a social audit done in Karon block in Deogarh district, the letter addressed to the RBI governor says that in the audit that covered 17 NREGP works in five panchayats during October 12-16 this year, they found that a nexus of corruption had grown around the system of paying wages through banks and post offices.
NREGP funds were 'brazenly' siphoned off through manipulated bank accounts opened in the names of NREGP workers with the connivance of local bank managers.
For example, the letter sites the instance of the Ranidh gram panchayat where it says that most NREGP workers had never visited the bank and their passbooks were blank.
Their wages (their real wages as well as those corresponding to fake entries in muster rolls) were collected from the Deogarh-Jamtara Central Cooperative Bank by middlemen who manage the accounts on their behalf, the letter says.
The real wages are given to the workers and the fake ones are pocketed by the middlemen, it says.
The bank records show that money had been transferred from the bank accounts of the workers but workers have no knowledge of it whatsoever.
An FIR was lodged on October 15 against four people, including the branch manager of the bank, it says, adding this was an inadequate response.
The letter urges the RBI to take institutional action against the bank besides a follow-up inquiry into the nexus of corruption and steps to ensure close monitoring and regulation of the banks involved in paying wages under the NREGP.
In a separate letter to the prime minister, the economists have sought detailed guidelines for bank disbursement like requirement of the worker to be present to collect the money and to update his passbook.
They have also demanded that all bank records related to NREGP workers be made available for public scrutiny and that states should be asked to frame MoUs to be signed with banks, which operate NREGP accounts on modality of payment and copies of these MoUs be sent to the Ministry of Rural Development and the CEGC.