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Bank Payments: End of Corruption in NREGA?

The payment of wages into bank accounts for work carried out under the National Rural Employment Guarantee Act has been suggested as a way to prevent embezzlement of funds. The practice has already begun in a few districts. Is this a foolproof system to control corruption? The early experience from a few blocks in Orissa suggests that this process is not free from its own problems.


Bank Payments: End of Corruption in NREGA?

Anish Vanaik, Siddhartha

The payment of wages into bank accounts for work carried out under the National Rural Employment Guarantee Act has been suggested as a way to prevent embezzlement of funds. The practice has already begun in a few districts. Is this a foolproof system to control corruption? The early experience from a few blocks in Orissa suggests that this process is not free from its own problems.

Thanks are due to Brahmachari, Nikhil Dey, Jean Drèze, Sowmya Kidambi, Rajkishor Mishra, Khetra Mohan, Kartikeyan Pandian and Reetika Khera for helpful comments.

Anish Vanaik ( and Siddhartha ( are both research scholars at the G P Pant Social Science Institute, Allahabad.

ecent reports of lurking corruption in public works initiated under the National Rural Employment Guarantee Act (NREGA) have led many observers to advocate the payment of wages through bank accounts, instead of cash payments. The main advantage of this approach is that it reduces the likelihood of any fudging of the muster rolls on the part of the implementing agencies (e g, the gram panchayats), since the actual wage payments are beyond their reach. It can be seen as an example of “the separation of payment agencies from implementing agencies”, adopted by several states (in various forms) as a safeguard against the embezzlement of NREGA wages. Bank payments of NREGA wages have already been introduced in a number of districts, and are likely to be used more widely in the near future.

Against this background, this paper presents a few observations on this arrangement, based on a field visit to Mayurbhanj district (Orissa). The investigation was carried out in October 2007, on the sidelines of a larger survey of NREGA in Orissa.1 A small team visited three blocks of Mayurbhanj district (Joshipur, Betnoti and Suliapada). It covered four randomlyselected gram panchayats (GPs) within each block and one worksite in each GP. One worksite in each block was selected for detailed muster-roll verification and a questionnaire was filled at each worksite.

Within Orissa, the system of paying NREGA wages through bank accounts was pioneered by Mayurbhanj. Beginning from late 2006, by May 2007 most blocks in Mayurbhanj had initiated the practice of paying labourers through bank or post office accounts.2 Today all but a few of the remotest GPs in Mayurbhanj disburse NREGA wages through bank accounts.

1 Rationale of Bank Payments

The NREGA attempts to make the process of wage payment (even in cash) as transparent as possible. There are a series of safeguards mandated by the Act.3 Muster rolls are supposed to be maintained at the worksite and displayed at the GP office. Payments are to be made in public in front of all the labourers, with the details of attendance and wages being read aloud from the muster rolls, so as to reduce the risk of fudged entries being made. Job cards are intended to act as a record kept with the labourers themselves of the wages they have received and the number of days they have worked. Through these there has been an attempt to create a new model of accountability in public works, eliminating corruption through the vigilance of workers themselves.

Unfortunately, from the larger survey mentioned earlier, it appears that a number of these transparency safeguards have been systematically undermined in Orissa.4 Muster rolls are almost never present at worksites. The muster rolls that were examined by the survey teams were often found to have fake names or inflated entries, suggesting a siphoning of funds by the middlemen. The job card design was faulty to the point of being useless (e g, it had no column to record wage payments). Contractors, who are banned under the Act from implementing NREGA works, were found at nearly half of the sample worksites. Accompanying them was an elaborate “PC system” (“percentage system”) of bribes to government officials at various levels of the official hierarchy. Indeed, one of the reasons cited for the introduction of bank payments in Orissa is that it would eliminate contractors from the system.

The fundamental attraction of the use of bank accounts for NREGA wage payments in Orissa is twofold. First, as mentioned earlier, it separates the payment agency from the implementing agency, thus making corruption far more difficult. Second, it ensures that money sanctioned for wage payments can be received only by the labourer listed on the muster rolls. It eliminates the possibility of any intermediaries – whether a contractor or a

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government official – getting their hands on the money without the knowledge of the labourer. Once this possibility is eliminated, other records like muster rolls and job cards should fall into place, since there is little incentive to fudge them if you cannot get the money at the end of it.

Bank payments also have a useful transparency role. They extend the trail of transparency all the way down to the money actually reaching the hand of the labourer. In addition, it can be argued that bank payments of NREGA wages encourage savings and help to initiate people to modern banking arrangements.

2 The System

This section discusses the system of maintaining bank accounts and the instruments of transfer.

2.1 Bank Accounts

In Mayurbhanj, accounts have been opened in a variety of banks – rural banks, cooperative banks, nationalised banks and, in a few cases, post offices. The distance between the GP and the bank has been the key criterion for selecting the bank. The effort has been to open accounts in institutions that are as close as possible to the village where work is being carried out. For some of the more inaccessible tribal pockets which are not yet using bank payments, there are even proposals to introduce mobile banks. This is the case in Betnoti.

In terms of opening bank accounts for labourers, a variety of procedures have been followed. In Suliapada and Betnoti blocks, most bank accounts were proactively opened en masse for the labourers, with GPs facilitating the entire process. However, very often, long periods of time would elapse between the time when application forms are completed and the receipt of passbooks. In fact, in most cases, passbooks were received only after the first payments had been made. In Joshipur, on the other hand, there was evidence that the opening of accounts was left to the individuals. The labourers either took the initiative or were made to open accounts so as to access the payment which was compulsorily made through account payee cheques.

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In most cases, these accounts were found to be zero balance or “no frills” accounts. The Reserve Bank of India directive for “no frills” accounts for NREGA purposes has been clearly helpful here. In the post office accounts, a minimum balance of Rs 50 is a requirement and there is a cap of Rs 2,000 on maximum withdrawal, per account, per day.

However, most of the accounts have been opened as operable by one individual. Ordinarily, this is the male head of the household. One of the significant aims of the NREGA is to ensure that women are paid equally and are able to exercise some control over their earnings. To this end, it would be preferable to have at least jointly operated accounts if not individual accounts for each NREGA worker.

Individual accounts for each worker would also double up as a transparency measure. In the current set-up where wage funds are simply credited to the account, there exists no record, including passbook, to identify the particular family member for whom the wage has been deposited. Introducing individual accounts would resolve this problem. On the other hand, there is a case for having a 1:1 ratio of job cards and passbooks, in which case, as will be discussed below, new ways of entering wage information into the passbook should go hand-in-hand with a joint account system.

2.2 Instruments of Transfer

There are slight variations in the methods followed by each of the three blocks vis-àvis bank payments, but all are based on the same basic flow of funds. Once a project is sanctioned, the money for it is sent to the account of the GP.5 As and when payments are due on the conclusion of muster rolls at the worksite, the funds are transferred from the GP account to the labourers’ bank accounts. This is done in one of four ways: letters of credit from the GP account to the labourers’ bank, cash deposits in the labourers’ bank, bearer’s cheques and account payee cheques to the labourers.

Letter of Credit: This is, at the moment, the most common instrument of transfer. In this system, the sarpanch and panchayat executive officer (PEO) draft a letter of credit detailing the accounts of the labourers to which the funds are to be credited. The funds are then transferred directly from the GP’s account into the bank accounts of the labourers. Delays during the course of the transfer of funds from the GP account to the labourers’ have been a major problem where the two accounts are not in the same bank (more on this later). One inherent flaw in this arrangement is that the labourer receives no intimation as to when the wages are credited to his or her account. An intimation procedure needs to be put in place.

Cash Deposits in the Labourers’ Bank:

Given that such delays were adding to those that already exist (e g, linked to record-keeping and work measurement) some GPs have found it more convenient to use the second method: to simply withdraw the funds from the bank physically and deposit them at the bank where the labourers’ accounts are kept. In such cases, on a given day, the sarpanch and PEO will go to the bank together, withdraw the money, carry it to the other bank and deposit it there along with a list of the accounts into which the money is to go.

Account Payee Cheques: In many GPs, bank accounts were opened as a result of payment made through account payee cheques. In order to compel workers to open accounts, they were paid through account payee cheques drawn on the GP account. Otherwise also, payment through account payee cheques is a widely used method to disburse wages in Mayurbhanj. One advantage of this method is that a receipt or acknowledgement can also be taken when the cheque is given to the labourer, unlike the letter of credit method where there is no interaction with the labourer before the actual payment is credited to the account of labourer. This also facilitates the regular maintenance of job cards.

Bearer’s Cheques: In some places in Joshipur, instead of account payee cheques, bearer’s cheques were issued. While still maintaining some of the advantages of the system of bank payments, this arrangement is vulnerable to manipulation. Any middleman who can manage


to catch hold of the bearer cheque would be able to withdraw the money.

3 Reception

There is a pronounced pattern to the way in which the elaborate system of bank payments has been received. District or block level officials are fairly sanguine about the possibilities of the bank system. Extravagant claims about the efficacy of the system in eliminating corruption are often made. It is not uncommon, however, to see GP level officials rather more circumspect about the system. They maintain that it has added to their work and they speak of the time that it takes to complete bank payments.

In a sense, however, these responses are difficult to interpret given the evidence that officials at a variety of levels often participate in the embezzlement of NREGA funds in Orissa. At least as important as the official responses is the way in which bank payments are received by the labourers themselves. The first few questions to block or district level officials about how labourers have received the bank payment system often yield formulaic declamations about its convenience and efficiency, how it eradicates corruption and encourages the saving habit, and so on. It is only after a little probing that the responses begin to suggest various acceptance problems in the “transition period”. The most common elaboration of this theme is something along following lines: “You know, these tribal people, they want to work in the morning and receive payment in the evening... Actually there is a local market on Friday and they demand to have their wages before that. They don’t understand that this cannot be done...”

Quite apart from showing a casual contempt for labourers, this statement is empirically questionable. At SS Nahandasole, labourers said that they would be happy if they received their bank payments within 10 days, and, if needed, even two weeks. However, anything more than that, they said, made it very difficult for them to sustain themselves. This suggests that labourers can both understand the fact that delays happen as well as cope with them, as long as they remain within reasonable bounds. The Act itself provides for the payment of wages within 15 days

of the date on which the work was 4 Bank Payment Hurdles
done as a basic entitlement of workers. Wage payment through banks is a recent
Quite obviously, the 15-day requirement innovation. Bank payment also means inter
applies to payments made through action of an external system with NREGA
banks as well. processes, which is bound to present some
Stray evidence suggests that where this policy challenges as well as compatibility
has been done, labourers are prepared to issues. Some of these hurdles are here.
accept it. Respondents from Renugaon (in
Betnoti GP) claimed that they much pre (a) Excess Burden and Bank Reluctance:
ferred the system of bank payments to It appears that banks (and even more so
payments in cash. They understood that post offices) are reluctant partners to the
bank accounts helped to ensure that they scheme as a whole. This is somewhat sur
received the correct amount of wages. At a prising, given the untapped potential
worksite using the cash payment system, rural India holds for the banking sector.
they claimed, contractors could get away Two concerns were usually cited by bank
with paying them half the wages for half a officials. First was the fact that large num
day of work (the worksite was only kept bers of individuals were likely to transact
open for half a day). business at the bank simultaneously. This
Renugaon was one of the villages where would entail holding amounts of cash that
the labourers’ bank was very close to the the bank was not, in the past, required to
village. Where this is not the case, as at keep. A second related concern is that the
Anla in Betnoti block, labourers could be branches near the GPs are small and ill
quite unhappy. The complaints were not equipped (staff- and infrastructure-wise)
simply about the fact that the bank was to deal with the large numbers of people
8 km away. It was also because they would involved. Opening large numbers of
have to sacrifice an entire working day (if accounts and making entries on a given day
not more) to withdraw money from the is extremely difficult in a poorly staffed
bank. Often, they might make the trip to local branch (or for a single postmaster).
the bank only to find that it would be
impossible for them to withdraw money (b) Delays: As mentioned earlier, in cases
on that day. where the GP account is held in a bank
Quite worryingly, most labourers which is different from that of the labour
seemed unfamiliar with most of the basic ers’ bank, delays often ensue.6 Some
banking procedures and documents. Many branches of local banks refuse to accept
were unable to read their passbook, and letters of credit transfers unless they have
there was strong evidence that some had been approved by their regional offices.
been made to sign withdrawal slips with- Thus, the process of clearing this transfer
out realising the implications. Nor had of funds often involves sending the letter
there been any effort by panchayat or of credit from the panchayat’s account to
block authorities to acquaint labourers the branch where the labourers’ account is
with these practices. held, and from there to the regional head-
It is only in a few places like Renugaon quarter of the bank, where the letter will
and Bilash (Suliapada block), where be approved. The funds will then be
labourers were relatively familiar with released from the regional headquarters
banking practices, that all the expected to the local branch and finally credited to
benefits of bank payments seemed to be the accounts of the labourers themselves.7
visible. As mentioned, labourers in Renu- We were informed that such a process
gaon testified that corruption had come would take 15-20 days at a minimum.
down since the introduction of these pay- Many labourers said that their main
ments. A few of the labourers in these two problem in the bank payment system was
villages even said that they were begin the hardship caused by frequent delays. In
ning to save some money – a source of most places it was common to find that
some hope that the system of wage pay wages were being paid around a month
ments through banks, if introduced with after the conclusion of work. In Khand
due consideration of all these factors, can deula village of Betnoti block, labourers
take popular root. were paid in September for work that had
april 26, 2008 Economic & Political Weekly


begun at the end of May and ended in the middle of June. In SS Nahandasole, labourers’ post office accounts were credited with their wages for two fortnights on July 3, 2007. The work had commenced on June 1 and ended on June 24.

It appears that, because of complications in the flow of funds, there is a temptation to wait till work is finished and then credit large amounts all at once, instead of regular weekly payments. This tendency adds to other delays, such as those due to work measurement and record keeping.

Furthermore, in the absence of any intimation arrangement, the money reaches the accounts of labourers without them knowing about it. As a result, most labourers are informed about the money reaching them through some middleman (usually a contractor who has greater access to the panchayat officials than they do). These delays and lack of intimation open up spaces within the system into which contractors and other middlemen insert themselves, claiming, then, that they form an indispensable link in the chain.

  • (c) Distance: While the question of distance from the village was one that the block officials were relatively sensitive to, many labourers interviewed did complain about the distance of the bank from the village. In Anla, labourers claimed that the bank was far away (they said that it was 9 km away) and that it was extremely inconvenient to use it.
  • (d) Complication of Records: Muster Rolls, Job Cards and Passbooks: In the enthusiasm to introduce the system of bank payments, insufficient attention has been paid to the status of the documents already involved in the NREGA. Where bank payments have been introduced, a degree of ad hocism has appeared with res pect to maintaining muster rolls and job cards. The Operational Guidelines envisaged a system where the maintenance of muster rolls and job cards is built around the distribution of wages in public: details on the muster rolls would be read out, wages distributed, signatures/thumb impressions of labourers collected and job card entries made. Since (in most places) letters of credit mean that money is directly transferred to the labourers’ bank
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    april 26, 2008

    accounts, there is no designated point in the process at which signatures on muster rolls and entries in job can be made at all, let alone publicly. Different officials choose to complete these documents at different points of time, though most make people sign muster rolls before payments are received and fill in job cards by and by. The uncertain status of two of the most essential transparency safeguards in the NREGA is an unacceptable situation; more so because a simple policy directive can clarify matters tremendously.

    A pessimistic, if only partial, view of the system of bank payments might hold that it has ended up merely adding another document to the numerous records that are supposed to be maintained under NREGA. In some places, the bank passbook has become a requirement for being employed at worksites. As elsewhere in Orissa, where an incomplete distribution of job cards has led to dangerous “adjustments” in the muster rolls to accommodate workers without a job card, an inadequate distribution of passbooks is having a similar effect.8 Officials and labourers claim that people who do not have passbooks are being paid through other people’s passbooks, with the money being divided up between labourers later. In such a situation it is difficult to know where “adjustment” ends and corruption begins. In essence, the system of adjustment runs completely counter to the aim of introducing the passbook system in the first place – to extend the trail of transparency right down to the labourer’s pocket.

    In other words, if a system of bank payments is to be put in place, it is essential to ensure complete distribution of job cards, and importantly, passbooks as well. One convenient way of doing this might be to have the job card application “double up” as an application for a bank account. Both documents, then, can run in tandem.

    (e) Continued Vulnerability to Deception:

    The most disturbing finding, however, was that in a number of villages labourers did not have their passbooks with them. In four out of the 11 villages that we visited, labourers either did not have their passbooks or these had been recently returned to them because of the news of an impending survey. In the case of Nahandasole, when we examined the dates of the withdrawal of money, the labourers claimed that the passbooks had been with someone else at the time of withdrawal. In other cases, labourers said that they were with the bank for updating (though a month or more might have passed since the time they received the money). In one instance, a contractor claimed that he had collected the passbooks, “as collateral for loans given to the labourers”.9

    Given such evidence that middlemen had collected passbooks, it is difficult to interpret the pattern of deposits and withdrawals found in the survey villages. In four villages where we were able to see the passbooks the pattern was that all the money would be withdrawn on the first visit after deposit. If, for instance, Rs 2,400 was deposited in a post office account on July 10, 2007, Rs 2,000 would be withdrawn on July 10, 2007 itself (this was the maximum withdrawal limit) and the remainder on the very next day. Therefore the money withdrawn was immediately visible in each of these four villages.

    However, in each of these, there was also evidence that a contractor or suspected contractor had collected the villagers and accompanied them to the bank. In the one village where we could see the passbooks and there was no suspicion of a contractor, the pattern of withdrawals was more mixed.

    (f) Incomplete Separation of Implementing and Payment Agency: One question that must be posed is how effectively the implementing and payment agencies have been separated in Orissa so far. The idea of separating implementing and payment agencies is that, since the implementing agencies would not have the money at any point of time, there would be less of an incentive to fudge the muster rolls. However, the system of payment, as it stands in Orissa, does not achieve this separation to a satisfactory degree. In practical terms, it is panchayat officials who prepare the muster rolls. The same officials then write the cheques on the basis of the muster rolls and sanction payments from the bank.

    A more effective separation of these would entail, at one end, some amount of effort at training “mates” (worksite supervisors) to maintain muster rolls and oversee work in conjunction with the junior


    engineer. In this way, the muster roll preparation would not be in the hands of the GP officials. At the other end, it would mean re-examining the way in which the funds are released to the panchayats.

    In Andhra Pradesh (AP), the muster rolls are passed directly to the block which sanctions payments and sends it directly to the post office at which the labourers’ accounts are held. The PEOs and sarpanches in Orissa can direct and manipulate the flow of funds in a way that is impossible for panchayat level officials in AP to do. This opens up many possibilities of collusion and misappropriation of funds. A PEO could, for instance, in tandem with a contractor, arrange to have money sent into accounts of people close to the contractor with the money being shared later. The possibility of such collusion is not ruled out in the AP system. It is, however, made less likely since the responsibility of the panchayat officials ends at the point of preparation of muster rolls. They do not deal with the money at all.

    As can be seen, the system of bank payments is not free of hurdles. Some of these, for instance bank reluctance, have been negotiated over time. Others threaten to get entrenched if they are not addressed immediately. At any rate, it must be acknowledged that an unqualified enthusiasm about bank payments is unwarranted. Banks in Mayurbhanj cannot be thought to have eliminated fundamental problems, like the presence of contractors or the possibility of corruption. Even some of the more procedural matters – policies with respect to clearances across banks and guidelines about completion of records and measures to ensure prompt payment

    – appear to have been inadequately tackled. If there was more clarity on these policies, performance of banking system could have palpably improved. As things stand, over half a year since the introduction of bank payments in Mayurbhanj, one can, at best, express a cautious approval of the banking system in principle, but the details of the system fail to impress.

    5 Comparison with Andhra Model

    The system of bank payments in Orissa took inspiration from AP’s experience. We have already dealt with the issue of separation of implementing agencies and payment agencies. It is worthwhile to examine some of the other aspects of the Andhra system with respect to the payment of wages through the post office, which have a potential to be fruitfully emulated in other places.

    Andhra Pradesh has worked out a method of integrating bank or post office payments with intimation of labourers and records maintenance. When the muster rolls are being paid from the block to the bank, a computerised pay slip is also printed at the block office. These are sent for distribution in public to the village. At the time of their collective distribution, the muster roll details are read out and job card entries can be made. This is a fairly innovative approach that can resolve the two basic problems that affect the banking system in Mayurbhanj: lack of transparency during payment of wages and absence of intimation arrangement.

    A second interesting innovation has attempted to address the issue of delays. In some districts of AP, this is being done through advance payments. A payment of Rs 60 (out of a minimum wage of Rs 80 per day) is credited to labourers’ accounts immediately after the end of the week and the rest is credited later according to the work measurements, thus ensuring that labourers do not have to turn to contractors or moneylenders for their immediate needs.

    There is much to be gained from understanding these alternative models of payment, particularly with respect to the solution of similar administrative problems. Experiences from AP and elsewhere should be drawn upon in carrying forward relatively new reform tools like the bank payment system.

    6 Future Prospects

    The system of bank payments for the NREGA in Orissa looks set to be expanded, with a number of other districts preparing to take it on as the model for removing corruption and ensuring correct payments. However, there seems to be little discussion of how a qualitative improvement can be brought about in the system. As we have argued, some thought needs to be put into the strengths and weaknesses of the system before such expansion occurs.

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    A major concern is the ad hocism that has persisted in the implementation of bank payments. Bank policy vis-à-vis NREGA wages at a variety of levels should be clarified and standardised as much as possible. Methods of transfer of funds vary from place to place. It is advisable that uniform, transparent procedures be introduced everywhere. Equally important is to avoid accentuating delays in wage payments and the flow of funds. We have already discussed how Andhra Pradesh has used advance payments to address this problem. Delays can also be reduced by negotiating with banks so that local branches are allowed to honour letters of credit from the GP, without having to seek the permission of the regional office.

    Related to this, means need to be devised to ensure that labourers are intimated directly when money has been credited to their accounts. In Andhra Pradesh, as we saw, there is a system of pay slips being distributed to labourers when letters of credit are issued to the post office. Apart from the question of intimation, this kind of collective gathering for the distribution of pay slips would ensure that the workers as a collective body remain a vital cog in the transparency processes of the NREGA. Such collective processes would offset the otherwise individualising tendencies of bank payments as a system of receiving wages. Public distribution of pay slips also facilitates the regular maintenance of job cards – a weak point of the system of bank payments in Orissa.

    Enhancing Transparency

    Bank policy on the question of the kinds of accounts to be opened also needs to be clarified. So far, bank accounts in Mayurbhanj have been opened in the name of male household members. This has significant drawbacks, in terms of gender equality as well as transparency. The best alternative would be a system of individual accounts, though even jointly operated accounts would be preferable to the current system.

    It might be useful, also, to devise new protocols for passbook entry as they relate to NREGA wages. As mentioned earlier, the current practice is to club payments from different weeks and for different members

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    april 26, 2008

    of the family into one entry. This makes it quite difficult for the recipients to verify that they are getting their due. It would enhance the transparency of the system if there were some indication of the period for which payment is being made as well as of the person to whom it is due (as per the muster roll). Alternatively, a new kind of passbook can be designed which could cover these demands specific to the NREGA.

    There is also some evidence that middlemen are being able to withdraw money from the bank for groups of people with simply the signature of the labourers on the withdrawal slips.10 Protocols relating to the NREGA wage payments must strictly disallow such withdrawals without the physical presence of the account holder. At the other end, some amount of information must be disseminated about the procedures to be followed at banks – the processes of deposit and withdrawal, and the importance of the various documents related to the bank (passbooks and withdrawal slips in particular).

    It is only when people become more comfortable with banks and banking procedures that there can be a reasonable expectation of savings. Evidence that the payment of NREGA wages through banks is leading to savings has been quite thin so far. Either accumulated debts or manipulation by contractor has meant that most of the wages received by labourers are withdrawn immediately. Nevertheless, if the system succeeds in the long term, it would address some of the problems that seem to impede savings – contractors and indebtedness in particular. In that case, the system of bank payments may well come into its own. Banks can also be effective in solving the problems of storage of money that people in rural areas face. NREGA wages are often received in large amounts, and it is likely that banks, as a safe way to store money, might displace such repositories as gold jewellery.

    Last but not least, it is important that bank payments should not be seen as superseding the other transparency measures that the NREGA sets in place. In particular, accurate maintenance of job cards and muster rolls must be strictly enforced. From Mayurbhanj itself, it is clear that bank payments, in and of themselves, cannot eliminate corruption. Improving the system of bank payments can only go part of the way towards that end. Building a culture of transparency and accountability in the implementation of NREGA remains extremely important.


    1 The main findings of that survey are reported in Drèze, Khera and Siddhartha (2007).

    2 In Mayurbhanj, both banks and post offices are being used to disburse payments. For the sake of presentational clarity, we will, from here on, only mention “bank accounts” or “bank payments”. It should be noted that post office accounts are similar to bank accounts in most relevant respects. The differences, where applicable, will be indicated.

    3 The full text of the Act is available at www.nrega.; for a reader-friendly introduction, see Dey, Drèze and Khera (2006). A “muster roll” is essentially a record of labourers’ attendance at the worksite, also used for wage payments and to claim funds from the block office. The details of attendance and wages are also recorded on each labourer’s “job card”.

    4 See Drèze, Khera and Siddhartha (2007).

    5 This applies to projects that are being carried out by GPs. The money for projects operating through the panchayat samiti is released directly from the district to the labourers’ accounts.

    6 According to the block officials, this often happens because of a finance ministry guideline stating that for a given scheme, all the funds of a GP must be kept in one bank. Some of them felt that permission should be given to GPs to open accounts in more than one bank.

    7 The procedure followed in the case of the post office is similar. The cheque, in that case, is deposited at the regional headquarters of the post office. For instance, for the Betnoti POs, this is at Baripada, this then, comes to the major local PO within the block (Manantri for Betnoti) and the postmaster of the village branch will then go to that post office and carry the money to the

    village PO.

    8 On job cards in Orissa, see Khera (2008).

    9 Apart from our suspicions that he had siphoned off labourers’ wages, this contractor admitted that in exchange for such advances he would reduce the price of the rope he bought from them by Rs 1-2 per kilo. Rope making is a common survival activity in Mayurbhanj during the slack season. The yields from it are extremely low. The fact that even the price of this minimum lifeline is reduced in lieu of loans, speaks volumes about the insidiousness of the system of advances operated by such contractors.

    10 The possibility of collusion between middlemen and bank officials was raised by some of the people we spoke to. In such cases, it is important that stern action be taken to discourage further emulation.


    Dey, N, J P Drèze and R Khera (2006): Employment Guarantee Act: A Primer, National Book Trust, New Delhi, also available at

    Drèze, J P, R Khera and Siddhartha (2007): ‘NREGA in Orissa: Ten Loopholes and the Silver Lining’, mimeo, G B Pant Social Science Institute, Allahabad, also available at

    Government of India (2006): NREGA: Operational Guidelines 2006, Ministry of Rural Development, New Delhi, also available at

    Khera, Reetika (2008): ‘The Black Hole of NREGA Records in Orissa’, forthcoming in Yojana.

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