Jul 17, 2014, 04.00AM IST
(It's reassuring that the…)
By Sugata Ghosh
The world that bankers have created occasionally comes back to haunt them. The other day, when a senior banker in Mumbai sent his maid, armed with an Aadhaar card, to open an account with the very same bank he works for, he didn't expect his little social experiment to backfire. The lady returned disappointed. The bank across the street had asked for documents she could not provide and an Aadhaar card alone wasn't enough.
A similar disappointment awaits Finance Minister Arun Jaitley if the lawyer-cum-politician in him is unable to sense that a transformational technology alone cannot achieve what Aadhaar aims to do.
It's reassuring that the new government has not junked a programme that was initiated by a failed regime, led by a person close to the Congress first family, and often criticised as neither novel nor practical. Indeed, the finance minister is willing to spend 54% more than what his predecessor had budgeted.
There's little doubt that the government has either figured out the utility of Aadhaar or thinks it's unwise and too late to roll back a highprofile project that has captured the imagination of millions. The generous gesture would energise Unique Identification Authority of India (UIDAI), the entity that issues the 12-digit Aadhaar number, to go on a fresh enrolment drive and advertise the benefits of an affordable technology.
So far, so good. But what next? It would be naive to believe that the sheer force of technology would overcome all hurdles, overpower all opposition. In fact, Aadhaar Phase II needs government handholding more than before to make it meaningful.
Banks, as always, will refuse to open accounts that will generate very little business. Bankers know there is no float on such accounts as they do not belong to well heeled investors but to beneficiaries who would withdraw fertiliser subsidy or money under an entitlement scheme as soon as the money hits the accounts.
Mind the gaps
What if LPG dealers, using their political network, gang up to delay Aadhaar? Many make a killing by selling cylinders booked against fictitious retail consumers and households, to restaurants, food kiosks and unauthorised entities who have to otherwise fork out a higher commercial rate.
Will oil companies, without a directive from the petroleum ministry, take the effort to compile the Aadhaar beneficiary details from UIDAI and deal with government banks which have to collect the subsidy and transfer tiny amounts to individual accounts?
Different arms of the government have to come together to make it happen. It isn't easy, but there's no other way for Jaitley to make sure that the money he earmarks is well spent.
It's the same for the fertiliser subsidy to reach farmers' bank accounts and wages to flow into accounts of the rural jobless.
There has to be a neater way to distribute funds than 100 men queuing up to collect subsidy and losing half of it to middlemen and village goons. Banks have to be told that anyone stepping in with an Aadhaar card must be allowed to open an account.
Oil companies must act and any resistance from dealers have to be firmly dealt with. Every bank branch should be equipped with biometric reader (it costs a mere Rest 1,500 a piece) and linked to the Aadhaar server (a one-time investment).
If banks can't be forced to grudgingly accept the reality and do the job, the government has to find the money to incentivise them. If necessary, even buy insurance cover to compensate banks for Aadhaar-linked frauds.
Let the beneficiaries know
Finally, a beneficiary must know the specific branch she has to visit to operate the account. It isn't always as simple. In a command performance, some of the public sector banks had opened millions of accounts for residents based on the Aadhaar data shared by the government.
But most of the accounts remained dormant as a large number of beneficiaries were clueless about the existence of their accounts.
Holding up all the pillars
Those who came to know were unsure which branch to go. And the few who found their way to bank branches could not withdraw money as the branches had no biometric reader.
No electronic KYC (Know Your Customer) could be carried out as there was no reader to verify the fingerprints of the person who had walked into the branch with the fingerprint record stored in the Aadhaar server. New Delhi, however, had unwittingly transferred funds to prove a point, unaware that the chain was broken.
Today, Aadhaar finds itself at the crossroads where it needs a push from the state. More than funds, it's about bridging the gap. Make no mistake: the 12-digit number is just one of the pillars in the Aadhaar ecosystem, to use a trite B-school term.
This unfinished ecosystem will languish and eventually peter out if the state is not quick enough to build the missing columns.
