A failure of scrutiny: DHFL fraud shows limitations of Aadhaar in plugging leakages

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March 26, 2021 6:30 AM

The failure of scrutiny mirrors that which was exposed in an investigative series by The Indian Express on the leakage in Jharkhand, in the centrally-funded scholarship scheme for minority students.

Lack of awareness among beneficiaries and the active cooperation of those who qualify for the schemes in defrauding the government is something that will cause the Aadhaar authentication system to stumble.Lack of awareness among beneficiaries and the active cooperation of those who qualify for the schemes in defrauding the government is something that will cause the Aadhaar authentication system to stumble.

The CBI’s case against DHFL, promoters the Wadhawan brothers, and unknown public servants for reportedly creating nearly 2.6 lakh fake home-loan accounts to access Pradhan Mantri Aawas Yojana (PMAY) benefits exposes the shortcomings in scrutiny of government schemes. The siphoning of public funds in the present instance is staggering—the total loan amount was over Rs 14,000 crore, of which over Rs 11,700 crore was routed to several fictitious concerns known as Bandra Book Firms. That a forensic audit report, as per multiple reports, exposed the fraud speaks volumes about the gaps in even an Aadhaar-based verification system—PMAY, a housing loan scheme for the economically weaker sections of the population under which the subsidy amount is claimed by the financing institutions, requires submission of the Aadhaar details of the beneficiary.

The failure of scrutiny mirrors that which was exposed in an investigative series by The Indian Express on the leakage in Jharkhand, in the centrally-funded scholarship scheme for minority students. Under the scheme, such students get registered online with bank account details and Aadhaar details, among other documentation requirements, to receive the annual scholarship amount as per the relevant category (class-wise & boarder/day scholar); they need to have scored more than 50% in the school exams, and their family income shouldn’t exceed Rs 1 lakh per year. The scholarship amount is directly transferred after eligibility is confirmed, the application accepted, and registration completed. However, in Jharkhand, a nexus between banks personnel, middle-men, government and school authorities bilked the government of significant amounts. Thanks to this, not only did many beneficiaries receive only a fraction of the money disbursed in their name but also many ineligible persons—including people in their late 20s, 30s and even one person in her 40s—received the scholarship. From scholarships to boarders at a school that has no boarding facility to female beneficiaries in a school that has only boys, the scam involved elements that exposed the last-mile gaps of the Aadhaar-based authentication system, just as the DHFL scam has.

Lack of awareness among beneficiaries and the active cooperation of those who qualify for the schemes in defrauding the government is something that will cause the Aadhaar authentication system to stumble. A basic income for the poor instead of the many subsidies and grants, it can be argued, can help avoid such fraud, but if there are intermediaries, there is always the likelihood of rent-seeking. For perspective, if income certification has to be done by local government/administration, there will always be the possibility that beneficiaries will have to pay to access the benefit.

Against this backdrop, fixing a reasonable sum within the scheme allocation for independent auditing, especially MGNREGA-style social auditing, could perhaps build a system of scrutiny that could pass muster—these may not be a foolproof check, but they can help substantially curb diversion of funds through beneficiary verification, authentication of the beneficiary receiving the benefit due, etc.

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