Aug 24 2012

Assessment of NREGA wage disbursement in banking system

Assessment of NREGA wage disbursement in banking system


AAUM Livelihood has partnered with IITM’ RTBI (Rural Technology Business Incubator) and collaborated with MoRD (Ministry of Rural Development) to know the effectiveness of wage disbursement through banking system. Thiruvalluar district was chosen to appraise the current bank linked wage disbursement practices.

Mahatma Gandhi National Rural Employment Guarantee Act is a job guarantee scheme enacted by legislation on August 25, 2005 with the aim of providing 100 days of unskilled labour in a financial year to adult members in a rural household willing to do unskilled manual work at the statutory minimum wage of Rs.137. The program also tries to bring about gender equality as most of the beneficiaries are rural women. The law was initially called National Rural Employment scheme, but was renamed in 2 October 2009 as Mahatma Gandhi National Rural Employment Guarantee Act.

Post 2008,it was decided to pay the wages to the beneficiaries through banks and post offices, however in Tamil Nadu payment through banks was not adopted. In May 2012, the government decided to adopt banking practices and one Panchayat was chosen to be linked with the bank for wage distribution in all the blocks of the TN districts. This pilot approach was adopted to know the shortcomings to effectively administer across all the places.

Most of the beneficiaries are not aware of the different procedure of the banking system. Hence the Panchayat officials helped them in opening accounts. Some beneficiaries however were able to open bank accounts by themselves. Inadequate transport facilities to the bank were also a hurdle for beneficiaries. The illiterate people and most of the elderly people were dependent on others for withdrawing money from the bank. The beneficiaries prefer direct payment than the baking system as it is more convenient and reliable. They also accepted the idea of BCM (Business Model Correspondent) when it was explained to them.

Most of the BDOs (Block Development Officer) have expressed their opinion that the banking system would be the appropriate mechanism for disbursement of wages. However a few bottlenecks have to be cleared to make it more attractive to the people.

A meeting was conducted by the Cholavaram block on 21st June 2012.for cluster Incharges. The meeting was conducted to improve the overall performance of the MGNREGA programme. Cluster coordinators from 37 Panchayats were present along with overseers and engineers. The participants who represented the Panchayats unilaterally expressed to the assessment team that the beneficiaries wished to continue the present system of direct cash payments as there are difficulties in accessing and understanding the complexities of the banking system. The cluster coordinators responded positively to the BCM model in their respective Panchayats.  It was also suggested that cluster coordinators could create awareness and provide training about the banking system to the beneficiaries.


The assessment team visited Palavedu Panchayat in Villivakkam block on 22nd June, 2012 to assess the BCM model that was being experimented in the block. The person who handles the BCM machine called a “Field BCM” is appointed by the bank and handles financial transactions of SHGs (Self help Group), OAP (Old Age Pension) and other government linked wage programmes. They also observed that the process involved in BCM was relatively simple banking procedures.


SWOC Analysis


 A wage payment through banking systems enables the entry for the common man into banking system.

BCM model are successful.

Banks within the reach of the beneficiaries is acceptable to beneficiaries.

Increased the saving habits.


 People have to travel between 3 to 7 kms to access bank facilities.

Around one day labour wage is being invested by the beneficiaries to collect the wages from banks.

Panchayat has to play the lead role in training.


Extending BCM model to every Panchayat.

Creating awareness through local media on banking systems and BCM model.

Providing functional literacy on banking systems.

Involve CSOs to orient beneficiaries.


Elderly people have to be assisted in banking systems and procedures.

Inadequate staff strength with banks.

General dislike on banking systems and institutions.

The beneficiaries are not against the banking system, but they find it difficult to accommodate themselves with it due to the remoteness of the banks, ignorance of procedures and time delay. The beneficiaries accept the BCM model due to its proximity and less procedural nature.

The assessment team recommended that the BCM model has to be extended to every Panchayat for the effective implementation of banking services to NREGA beneficiaries. The local media can be used to create awareness of the BCM model so that it will be acceptable to the beneficiaries. Providing functional literacy on systems and procedures has to be linked with MGNREGA wage payment through banking systems. The Panchayats have to initiate intensive drive to educate the beneficiaries on the banking systems.


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