The new biometrics-enabled e-payment channel is not cheaper to the State Government: Ashok Khemka
ET Bureau Mar
29, 2012, 12.45PM IST
New Delhi: Haryana is one of the first states in India to move
towards e-payments
of welfare programmes. Early last year, it began stopped disbursing its
social sector pensions through sarpanches, and began using banks and
banking correspondents instead.
However, after six or so months, the state government called off the project and went back to the old approach. Given that the rest of the country is also moving towards e-payments of welfare programmes, what does Haryana's experience have to tell us about e-payments? Is the new channel better at rooting out corruption? Is it more cost-effective at delivery than the erstwhile model?
ET emailed some of these questions to Ashok Khemka, the Director of the state's Department for Social Justice and Empowerment. Read on.
Haryana is an important case study for anyone trying to understand the issues involved in moving towards e-payment of welfare schemes. Given that, can you give me an overview of the reasons why you wanted to move to e-payment of pensions?
The distribution system is well established since long in the State of Haryana. The Department of Social Justice & Empowerment was making payments of social security benefits through the Panchayati Raj Institutions.
A fixed remuneration for this work is paid to the Sarpanches on monthly basis. The cost of the physical mode of distribution works out to Rs 2.50 crores per annum. This is only 0.15% of the total payments made. The decision to move to the E-payments through bank accounts was taken by the Government to give an impetus to the Financial Inclusion Plan of the Ministry of Finance and the Planning Commission.
The objective was to catalyze the Financial Inclusion of the weaker sections of society into the formal banking system by remitting pensions electronically into the bank accounts. It was expected that the beneficiary would be able to transact from his bank account at the Customer Service Point established by the Business Correspondent of the Bank at the village level.
The welfare benefits would be leveraged to help establish banking infrastructure in the rural areas.
However, after six months of the rollout, you went back to the old system. In my previous interview with you, you cited two reasons. One, under-deployment of BC terminals. And, two, a problem with biometrics identification. Can you tell me about both? For instance, why was there an under-deployment of the BC terminals?
We had created 19.2 lakh bank accounts, of which 18.2 lakh bank accounts are still in active use. Against the 18.2 lakh bank accounts in active use, even allowing a minimum of one withdrawal per month, the infrastructure of the BC ought to have catered to at least 18.2 lakh withdrawals per month, that is, at the rate of just one withdrawal per account per month.
But the BC could do no more than 3 lakh transactions in a month. This means that the BC could cater to just one withdrawal facility to the customer for every six months on an average. This clearly is not acceptable to any customer, including you and me.
The banks while signing the agreement with the Business Correspondent did not take adequate care to lay down the parameters to determine the service quality of the BC, i.e., adequate number of visits of the BC with predictability.
The BC is supposed to be a local person to be directly engaged by the Bank at the village level, but unfortunately the BC was reduced to be a subsidiary Company of the Technical Service Provider. The cost cutting by the BC Company resulted to inadequate deployment of terminal-days.
However, after six or so months, the state government called off the project and went back to the old approach. Given that the rest of the country is also moving towards e-payments of welfare programmes, what does Haryana's experience have to tell us about e-payments? Is the new channel better at rooting out corruption? Is it more cost-effective at delivery than the erstwhile model?
ET emailed some of these questions to Ashok Khemka, the Director of the state's Department for Social Justice and Empowerment. Read on.
Haryana is an important case study for anyone trying to understand the issues involved in moving towards e-payment of welfare schemes. Given that, can you give me an overview of the reasons why you wanted to move to e-payment of pensions?
The distribution system is well established since long in the State of Haryana. The Department of Social Justice & Empowerment was making payments of social security benefits through the Panchayati Raj Institutions.
A fixed remuneration for this work is paid to the Sarpanches on monthly basis. The cost of the physical mode of distribution works out to Rs 2.50 crores per annum. This is only 0.15% of the total payments made. The decision to move to the E-payments through bank accounts was taken by the Government to give an impetus to the Financial Inclusion Plan of the Ministry of Finance and the Planning Commission.
The objective was to catalyze the Financial Inclusion of the weaker sections of society into the formal banking system by remitting pensions electronically into the bank accounts. It was expected that the beneficiary would be able to transact from his bank account at the Customer Service Point established by the Business Correspondent of the Bank at the village level.
The welfare benefits would be leveraged to help establish banking infrastructure in the rural areas.
However, after six months of the rollout, you went back to the old system. In my previous interview with you, you cited two reasons. One, under-deployment of BC terminals. And, two, a problem with biometrics identification. Can you tell me about both? For instance, why was there an under-deployment of the BC terminals?
We had created 19.2 lakh bank accounts, of which 18.2 lakh bank accounts are still in active use. Against the 18.2 lakh bank accounts in active use, even allowing a minimum of one withdrawal per month, the infrastructure of the BC ought to have catered to at least 18.2 lakh withdrawals per month, that is, at the rate of just one withdrawal per account per month.
But the BC could do no more than 3 lakh transactions in a month. This means that the BC could cater to just one withdrawal facility to the customer for every six months on an average. This clearly is not acceptable to any customer, including you and me.
The banks while signing the agreement with the Business Correspondent did not take adequate care to lay down the parameters to determine the service quality of the BC, i.e., adequate number of visits of the BC with predictability.
The BC is supposed to be a local person to be directly engaged by the Bank at the village level, but unfortunately the BC was reduced to be a subsidiary Company of the Technical Service Provider. The cost cutting by the BC Company resulted to inadequate deployment of terminal-days.
