INTERVIEW 07 May 2011
The UID chief believes many applications and benefits can be linked to unique identity for all Indians
In the process of handing out a new, unique identity to over a billion Indians, Nandan Nilekani has carved out a unique identity for himself. If things pan out as planned, his stint at Infosys will pale in comparison to his contribution in the public space. With a hands-off approach, Nilekani is guiding India’s single-biggest public project since Independence. Read Nilekani on what all is possible with the identity and imagine an India like he does.
Excerpts from a conversation with BW’s Anjuli Bhargava:
What is the main objective of offering this new identity to people?
The whole identity infrastructure has multiple dimensions. One of the primary objectives is to address the need for inclusion because we still have a large number of people whose existence is currently not acknowledged by the state — no birth certificate, ration card, school certificate…. For inclusive growth, you have to know who to include.
Second, this is the first time people will have a single national portable identity. Due to the online authentication capability, I may be from a small village in Bihar but if I come to Delhi, the number is still valid. In a country where there is a lot of migration, this is critical.
Third, the unique identity number can become a basic know-your-customer (KYC) for a variety of public services. The finance ministry has said that Aadhaar can be a KYC for all financial products and the RBI has issued a notification for no-frills bank accounts. The mobile regulator has recognised it as a KYC for mobile connections. Tripura has issued a notification saying that Aadhaar can be the KYC for all government services in the state. We have talked to Sebi (Securities and Exchange Board of India) and Irda (Insurance Regulatory and Development Authority) to make Aadhaar the KYC for financial products. The idea is to use it to reduce entry barriers and make it a gateway.
The fourth (objective) is that it provides a platform to re-engineer public services. All payments from states across various schemes can flow on the basis of an Aadhaar number. It removes all scope for duplication, forgery or funds flowing to wrong beneficiaries.
So far, the available IDs and the application have been entwined. This is just a pure ID that shows you are who you claim to be, and it is online. It can be linked and put to any use.
What is the main objective of offering this new identity to people?
The whole identity infrastructure has multiple dimensions. One of the primary objectives is to address the need for inclusion because we still have a large number of people whose existence is currently not acknowledged by the state — no birth certificate, ration card, school certificate…. For inclusive growth, you have to know who to include.
Second, this is the first time people will have a single national portable identity. Due to the online authentication capability, I may be from a small village in Bihar but if I come to Delhi, the number is still valid. In a country where there is a lot of migration, this is critical.
Third, the unique identity number can become a basic know-your-customer (KYC) for a variety of public services. The finance ministry has said that Aadhaar can be a KYC for all financial products and the RBI has issued a notification for no-frills bank accounts. The mobile regulator has recognised it as a KYC for mobile connections. Tripura has issued a notification saying that Aadhaar can be the KYC for all government services in the state. We have talked to Sebi (Securities and Exchange Board of India) and Irda (Insurance Regulatory and Development Authority) to make Aadhaar the KYC for financial products. The idea is to use it to reduce entry barriers and make it a gateway.
The fourth (objective) is that it provides a platform to re-engineer public services. All payments from states across various schemes can flow on the basis of an Aadhaar number. It removes all scope for duplication, forgery or funds flowing to wrong beneficiaries.
So far, the available IDs and the application have been entwined. This is just a pure ID that shows you are who you claim to be, and it is online. It can be linked and put to any use.
FAST FACTS
Aadhaar
Enrolment stations: 7,000
Numbers issued: 5.2 million
Numbers issued per day: 75,000-100,000
Registrars: 25 active registrars; MoUs
for 67 registrars
Financial inclusion: 88 per cent of Aadhaar
card holders have opted for
Aadhaarenabled bank accounts
Aadhaar
Enrolment stations: 7,000
Numbers issued: 5.2 million
Numbers issued per day: 75,000-100,000
Registrars: 25 active registrars; MoUs
for 67 registrars
Financial inclusion: 88 per cent of Aadhaar
card holders have opted for
Aadhaarenabled bank accounts
Do banks and insurance companies perceive this as an opportunity? It will bring in new customers, but most of them would be at the bottom of the pyramid.
As envisaged, Aadhaar will allow you to open a bank account and you can use micro ATMs to deposit or withdraw money (through business correspondents) from your account anywhere in the country. Then you are taking banking to the people in the real sense. In India’s banking history, there was nationalisation and creation of the State Bank of India. Then came the Bank Nationalization Act when many banks were nationalised — lots of branches were opened and this helped financial inclusion. Then came 1993-94, when new private sector banks were allowed, and they brought in technology in a big way. This also helped increase inclusion. What we are approaching is the last frontier — taking banking to every resident of India.
Would it be worthwhile for banks?
Opening accounts through Aadhaar will cost them virtually nothing. On the other hand, as more people come into the banking net, banks’ revenues will go up. Maybe not initially, but these are all future customers.
Second, government benefits can flow through this pipe. Today, we spend some Rs 1 lakh crore on providing cash benefits to the marginalised. NREGA (National Rural Employment Guarantee Act; Rs 40,000 crore), Indira Awaas Yojna, scholarships, old age payments, pensions, maternal benefits — all these involve cash payments, which can flow through Aadhaar-enabled bank accounts.
Think of this as a national payment network for people on the margin. Think of the ease of remittances. It is estimated that only 10 per cent of the domestic (inland) remittances flow through the formal system. People actually carry money physically back to their villages or transfer through banks, which is more expensive. This can be done through micro ATMs, literally at the touch of a finger.
Then, payments to government workers can flow through this. In my estimate, there are at least 2 million workers added to the government system — anganwadi workers, para teachers, asha workers, etc. Currently, some get money into accounts, some get it through local panchayats or through some kind of local body. Imagine if all these people were electronically paid directly into their accounts.
It sounds unreal… almost utopian….
I understand the scepticism. But that is our vision, that is why we are here.
To what extent would states be willing to replace the present public distribution system (PDS) with a cash subsidy paid through Aadhaar-linked bank accounts?
We should separate the PDS reform from the mode of delivery. Aadhaar can be used for making the PDS system more accountable, regardless of whether we move to a cash subsidy or not. The latter is a policy decision. I am only looking at the plumbing; we will give you very good plumbing, which lets you ensure that benefits reach people.
Are you happy with the first phase — the enrolment process — so far?
It is picking up. These things take time. We are at 4.5 million. Our estimate is that daily enrolment is 100,000-200,000. Our goal is a million a day by October. In the five years that I am here, we want to hit 600 million enrolments.
On the applications side, if we can demonstrate financial inclusion and more people get payments electronically, if we can use it for mobile inclusion and if a few state governments can start using it for some of their flagship programmes, I would say, my job is done.
So what is a typical day like for you?
I meet you (laughs). I hold strategy discussions, review the project at a high level, get involved with architectural and partnership discussions with banks, mobile companies and ministries. There is a whole complex environment to be managed. I do that.
Where do you go from here? Parliament and politics?
I like working on problems of social significance using technology. My corporate career is definitely behind me. There are so many reform possibilities where I can contribute. And none of this can be done without technology. That is what excites me — the stuff that I know can make a difference to millions of people.
(This story was published in Businessworld Issue Dated 16-05-2011) As envisaged, Aadhaar will allow you to open a bank account and you can use micro ATMs to deposit or withdraw money (through business correspondents) from your account anywhere in the country. Then you are taking banking to the people in the real sense. In India’s banking history, there was nationalisation and creation of the State Bank of India. Then came the Bank Nationalization Act when many banks were nationalised — lots of branches were opened and this helped financial inclusion. Then came 1993-94, when new private sector banks were allowed, and they brought in technology in a big way. This also helped increase inclusion. What we are approaching is the last frontier — taking banking to every resident of India.
Would it be worthwhile for banks?
Opening accounts through Aadhaar will cost them virtually nothing. On the other hand, as more people come into the banking net, banks’ revenues will go up. Maybe not initially, but these are all future customers.
Second, government benefits can flow through this pipe. Today, we spend some Rs 1 lakh crore on providing cash benefits to the marginalised. NREGA (National Rural Employment Guarantee Act; Rs 40,000 crore), Indira Awaas Yojna, scholarships, old age payments, pensions, maternal benefits — all these involve cash payments, which can flow through Aadhaar-enabled bank accounts.
Think of this as a national payment network for people on the margin. Think of the ease of remittances. It is estimated that only 10 per cent of the domestic (inland) remittances flow through the formal system. People actually carry money physically back to their villages or transfer through banks, which is more expensive. This can be done through micro ATMs, literally at the touch of a finger.
Then, payments to government workers can flow through this. In my estimate, there are at least 2 million workers added to the government system — anganwadi workers, para teachers, asha workers, etc. Currently, some get money into accounts, some get it through local panchayats or through some kind of local body. Imagine if all these people were electronically paid directly into their accounts.
It sounds unreal… almost utopian….
I understand the scepticism. But that is our vision, that is why we are here.
To what extent would states be willing to replace the present public distribution system (PDS) with a cash subsidy paid through Aadhaar-linked bank accounts?
We should separate the PDS reform from the mode of delivery. Aadhaar can be used for making the PDS system more accountable, regardless of whether we move to a cash subsidy or not. The latter is a policy decision. I am only looking at the plumbing; we will give you very good plumbing, which lets you ensure that benefits reach people.
Are you happy with the first phase — the enrolment process — so far?
It is picking up. These things take time. We are at 4.5 million. Our estimate is that daily enrolment is 100,000-200,000. Our goal is a million a day by October. In the five years that I am here, we want to hit 600 million enrolments.
On the applications side, if we can demonstrate financial inclusion and more people get payments electronically, if we can use it for mobile inclusion and if a few state governments can start using it for some of their flagship programmes, I would say, my job is done.
So what is a typical day like for you?
I meet you (laughs). I hold strategy discussions, review the project at a high level, get involved with architectural and partnership discussions with banks, mobile companies and ministries. There is a whole complex environment to be managed. I do that.
Where do you go from here? Parliament and politics?
I like working on problems of social significance using technology. My corporate career is definitely behind me. There are so many reform possibilities where I can contribute. And none of this can be done without technology. That is what excites me — the stuff that I know can make a difference to millions of people.
