by Dinesh Unnikrishnan Oct 8, 2015 11:38 IST
The question whether Aadhaar should be made available for voluntary use of citizens to access all government schemes and financial services is well on its way to becoming the next big controversial issue. The Supreme Court, on Wednesday, refused to modify its 11 August order restricting the use of Aadhaar card for distribution of foodgrain under PDS, supply of kerosene oil and LPG.
The SC bench refused to hear the pleas by regulators, including the Reserve Bank of India (RBI) and Securities and exchange board of India (Sebi), on the status of Aadhaar usage in financial services, saying the matter has now been moved to a larger bench.
Reuters
A lot is at stake with Aadhaar — a key reform step initiated by the UPA regime and followed by the NDA — given its critical importance of as a unique identification tool necessary to manage rollout of various government schemes and financial innovation in a huge country of 120 crore population. It’s unfortunate that the SC gets into executive decisions of the government.
So far, about 92 crore Aadhhar cards have been issued by the Unique Identification Authority of India. Aadhaar is already in use for imparting various government subsidies, the Modi government's financial inclusion scheme Jan Dhan Yojana and the social welfare scheme Mahatma Gandhi National Rural Employment Guarantee Scheme, among others.
Besides, as the next step, Aadhaar is being considered for use by the Election Commission of India, Pension Fund Regulatory Authority and Employees’ Provident Fund Organization to use Aadhaar number to identify the beneficiaries and develop biometric tools for them.
The prevailing confusion over the use of Aadhaar after the 11 August SC judgment has prompted all these bodies to put their plans on hold, until further clarity emerges.
If the voluntary use of Aadhaar is not permitted in the banking system for financial inclusion, the first casualty of this will be Modi’s pet scheme, Jan Dhan Yojana, whose only chance for success depends on the Aadhaar usage.
Under the scheme, some 18 crore accounts have been already opened and banks have begun to offer overdraft facilities and insurance, pension products linked to these accounts on the condition that the beneficiary accounts are seeded to Aadhaar.
If the banking services are excluded from the voluntary use of Aadhaar, this scheme cannot work due to serious duplication issues, i.e. the same customer can go to different banks and avail the benefits presenting different documents such as driving licence or ration card.
Banks are well aware of this problem. Indian Banks Association (IBA), the industry lobby of Indian banks is too planning to move the Supreme Court to make a case for voluntary use of Aadhaar in banking transactions, said a senior IBA official to this writer on condition of anonymity.
“If Aadhaar is dismantled, the entire Jan Dhan programme is under risk,” said the official. Following the SC verdict, the finance ministry has told banks to wait before using Aadhaar in banking activities, the official said.
Moreover, this is a time when the Indian banking sector is witnessing a flood of reforms with the entry of new set of banks such as small finance banks and payments banks. Aadhaar will be key for the rollout of these entities for KYC purpose and, for the same reason, restricting can play spoilsport.
In a recent column in The Indian Express, Nandan Nilekani, former chairman of UIDAI has strongly questioned the SC’s interim order on two grounds:
First, the freedom of individual choice. Enrolment in Aadhaar is voluntary and individuals granting permission for the UIDAI system to share their name and address in a secure way with another system for their own convenience and benefit hardly qualifies as a violation of their right to privacy.
Second,
“On what basis did the court choose the use of Aadhaar for gas cylinders over other subsidies? Why allow ration shops to use Aadhaar for authentication and eKYC to “open” a ration account, but stay silent on Aadhaar’s eKYC to getting a bank account or a SIM card? Why be silent on the use of Aadhaar authentication and eKYC for other social and economic interventions like biometric attendance, the Jan Dhan Yojana, the Mahatma Gandhi National Rural Employment Guarantee Scheme, eSign (digital signatures) and new payments banks?”
“On what basis did the court choose the use of Aadhaar for gas cylinders over other subsidies? Why allow ration shops to use Aadhaar for authentication and eKYC to “open” a ration account, but stay silent on Aadhaar’s eKYC to getting a bank account or a SIM card? Why be silent on the use of Aadhaar authentication and eKYC for other social and economic interventions like biometric attendance, the Jan Dhan Yojana, the Mahatma Gandhi National Rural Employment Guarantee Scheme, eSign (digital signatures) and new payments banks?”
As Nilekani argues, there is hardly any logic in permitting the use of Aadhaar for some government subsidies and deny for others. In any case, if the banks are permitted to use Aadhaar for the rollout of direct benefit transfer to give gas and food subsidies, why not permit the same for the opening of bank accounts itself? This logic is hard to understand.
Even now, the banks are not insisting Aadhaar for opening an account. The customer can use any other identity proofs for that. Aadhaar becomes mandatory only when it comes to rollout of benefits such as loan facilities through Jan Dhan accounts.
This is something the banks have insisted for long since the use of multiple documents can result in duplication. This is something RBI governor Raghuram Rajan too has highlighted recently after the SC’s interim ruling, saying Aadhaar usage can help a deserving person get credit, avoid over-borrowing by individuals and plug leakages. Rajan also pointed out the experience of the US with respect to the use of social security number, where there is no privacy concerns have come up so far.
Already, a substantial chunk of investments has gone into Aadhaar and its use to connect India’s six lakh villages to various social security schemes.
The argument that a citizen’s private information is under risk to expose when he enrolls for Aadhaar shouldn’t be a reason for restricting this since UIDAI has repeated that private information is safe with it. More critically, the Supreme Court’s intervention in executive decisions could create a lot of confusion to the institutions involved.
Certainly, it is logical to have concerns on privacy when the government data base will have the biometric data of its citizens (thumb and iris impressions). If something goes wrong with the safety promised by UIDAI with respect to the secrecy of this data, this information can be potentially misused.
But, the point here is it is the government's job to put these concerns at rest backed by legislation on privacy. This is where the Modi government should act smartly by bringing in strong laws to allay concerns on Aadhaar roll out. Aadhaar is is a reform Indian cannot afford to risk.
It is unfair if the SC comes in the way of Aadhaar since this tool is the corner stone for many critical reforms India desperately needs to prevent subsidy theft and push financial inclusion, among other things.
Denying Aadhaar’s voluntary use would be a critical mistake by the apex court.
