Santosh Tiwari Posted online: Monday, Jun 17, 2013 at 0000 hrs
New Delhi : The central bank may have declared in December that the Unique Identification Authority if India’s Aadhaar numbers can be used by banks
as valid know your customer (KYC) proof, but the country’s biggest bank is having nothing of it. As a result, the law ministry has been asked to opine on the matter, and an opinion is expected later this week.
Though private banks like Axis Bank and ICICI Bank are using the Aadhaar number for direct benefit transfers (DBT) for cooking gas, State Bank of India has not done a single transaction using the Aadhaar-based identification platform. Nor is the bank accepting the Aadhaar letter as KYC-compatible.
SBI’s view is that since the KYC is being done on the basis of Aadhaar, if any liability arises from the transaction — the money is given to the wrong person — that liability has to be borne by UIDAI. After a meeting was held by the finance minister, it was decided that the liability would be borne by UIDAI.
One option is for UIDAI to buy an insurance cover, but since this has not been done before by the government, the option was shot down. The other option is to create a fund so that as and when a liability arises, the fund will take care of it.
Once the law ministry’s opinion comes in, the finance ministry will create the necessary framework and allocate funds to it.
UIDAI officials say that over R100 crore has been disbursed through banks and post offices using Aadhaar-based identification since January 1, 2013.
The number of people withdrawing money with the help of Aadhaar-based identification has crossed 10 lakh, officials said, 80% of which has taken place in post offices since March, when India Post started doing it. This means only 20% of the coverage is through banks, and that too during the January to June 13 period. Further, officials pointed out that most of the transactions in banks had happened in private banks — a maximum of about 100,000 people through Axis Bank followed by ICICI Bank and a few public sector banks.
Apart from the setback to the DBT project , not accepting Aadhaar as a valid KYC criterion has also slowed down the process of financial inclusion as a lot more people are enrolling for Aadhaar numbers in comparison with any other government scheme.