Aadhar to create bank accounts electronically for poor people

Mumbai, Feb 10, DH News Service:

To popularise banking services, Aadhar would electronically create accounts for poor individuals at partner banks, said the agency chairman Nandan Nilekani on Wednesday.
His statement addresses the concerns of many bankers who had feared that they did not have the infrastructure to creating bank accounts for millions of Aadhar number holders. The authorities of the Aadhar project, which is working to give a unique number to all Indian residents, see spread of banking as a major outcome of their effort. Eighty per cent of the two million individuals, who have been enrolled for the unique Aadhar number so far, have requeste d for bank accounts, said Nilekani while addressing the Nasscom Leadership Forum 2011. The poor individuals find it difficult to open bank accounts as they are unable to meet the Know Your Customer (KYC) norms of the banks. Under KYC norms, banks are requi red to verify documents, which authenticate the identity of individuals, to prevent the misuse of bank accounts for money laundering, terrorism and other illegal activities. The Finance ministry and RBI have recently notified that banks could open no -frill accounts for poor individuals with only Aadhar number, Nilekani noted. But he also said that of the estimated 70,000 bank branches in the country only 6 per cent were in villages, thus making banking services elusive even for the villagers with accounts. To overcome this constraint, RBI had issued guidelines to enroll business correspondents, under which a variety of private businesses from petrol pumps to local kirana shops, could start acting as micro ATMs. A bank account holder could approach a kira na shop to draw a small sum, say Rs 300, and the money would be dispensed from the shops cash box after authenticating the identity of the individual online. The application would also deduct the money from the individual and credit it to the kiranas account, Nilekani said. In Jharkhand, three banks were conducting a pilot project across several districts to disburse NREGA funds through micro ATMs, he informed. If the idea worked the government could disburse up to Rs 100,000 crores it spends on developmental programmes such as NREGA through Aadhar-enabled Micro ATMs, he informed.

BANKING
NPCL rolls out Aadhar -enabled payment system

4 Mar, 2011, 0719 hrs IST, ET Bureau

MUMBAI: The National Payment Corporation, or NPCL, has rolled out its Aadharenabled payment system (AEPS) project to make banking easier for those at the bottom of the pyramid by involving business correspondents . NPCL has partnered with three banks for the project. It is also planning to rope in Nabard for involving rur al account holders into the core banking fold. AEPS will promote financial inclusion and help customers having no frills accounts to access banking services from business correspondents from across banks. Through this facility , customers need not go to the bank with which s/he holds an account. NPCL defines it as a bank -led model, enabling online financial inclusion transaction at PoS or point of sale, or the MicroATM, through Business Correspondent (BC) of one bank for customers of another using Aadhar Authentication . The pilot project being run in districts of Jharkhand (where the first unique identity authority, or UID numbers, have been provided) in association with three banks ICICI bank, Union bank of India and Bank of India. Under AEPS, customers would be able to check their balance enquiries, withdraw and deposit cash and transfer funds from one UID number to the other from any of the business correspondents. Business correspondents act on behalf of bank branches in the absence of brick and mortar branch and provide banking services. They have been important agents of financial inclusion .

(See pictures on next page)

Civil Society News New Delhi

Across the road from the Oberoi and the Aman , two of Delhi's most expensive hotels, people are checking into a night shelter called Apna Ghar. They turn up in a dribble, picking their way through the surrounding slum and climbing a dingy staircase to a large stark hall on the first floor. Night shelters are dreary places and this one is no exception. It is an extension of the mean world of the streets. There is little to look forward to. But these days there is a buzz at Apna Ghar. It is about Aadhar, a system of personal identification which invo lves a unique number and a card with photograph. Some 250 people at Apna Ghar and living in nearby shanties and parks have been given Aadhar numbers and cards. Another 200 will get their numbers soon. Thanks to this identity, many of them now also have zero -balance bank accounts with the Corporation Bank branch at Lajpat Nagar. For these homeless people, the number, card and bank account are emblems of a status they never imagined could have been their s. Long accustomed to being pushed around and harassed by the police, the Aadhar identity now serves as the government's acceptance of their existence. Aadhar has been made possible by the Unique Identification Authority of India whose chairman is Nandan Nilekani. He is one of the founders of the information technology company, Infosys, and was its managing director before he shifted to government to take up this project. The Aadhar number involves taking images of the fingerprints and the iris of a person. The name, age and address are also recorded. In the case of the homeless

the address of the NGO running the night shelter is given. This information is stored electronically on computers and made available universally through the Internet. There are some 30,000 homeless people identified in Delhi who will be given the Aadhar number. But the problem of identification relates to millions of people who may not technically be homeless but don't have papers to prove their identities. Across India more than 500 million people are not part of the banking system because of problems related to identity. Aadhar, with its use of information technology, is regarded by the government as a quick and efficient way of establishing identities on such a large scale. It is seen as a tool for inclusion, particularly for bringing more people into the formal banking system. Serious concerns: However, several serious concerns have been raised about Aadhar. Several leaders in the social sector feel it is too intrusive. There are fears that it will be misused and lead to civil rights violations. Others find it too costly as a nationwide initiative. There is criticism that the Manmohan Singh government has not been transparent and needed to have public debate before launching A adhar. The choice of Nilekani is also questioned. For many the jury is still out on whether the system will work at all. There are doubts whether it is feasible to store hundreds of millions of identities in a technologically foolproof way. Homeless feel empowered: But at Apna Ghar on the floor of the night shelter, homeless people are happy to show their identification cards with their Aadhar numbers. They are also excited about having bank accounts. The Aadhar number has made it possible. Earlier they didn't have the identification papers the bank would ask for. It is just weeks since the accounts were opened. So, there is some hesitation in going to the nearby Lajpat Nagar branch of the Corporation Bank. But people are already dreaming o f what they can do. Many of them have decided that what they need are ATM cards so that, being homeless and footloose, they can access their money as and when they need it. The shelter is run by the Society for the Promotion of Youth and Masses (SPYM). But before this NGO took charge it was run by the Municipal Corporation of Delhi (MCD). On 2 October, on the eve of the Commonwealth Games, Chief Minister Sheila Dikshit presided over a ceremony at the Apna Ghar night shelter to give away 40 Aadhar numbers.

Since then the demand for the number has kept growing. An Aadhar counter opened at the shelter makes it simple to register. Young computer operators in yellow sweat shirts with the Aadhar logo work in shifts, collecting personal data and transferring it online. The process takes about 20 minutes. (See pictures on next page)

Aadhar Leading To Surge In Bank Accounts

By venu achalla December 10, 2010
0

The main force behind Aadhaar is to provide residents with a means to easily and effectively establish their identity to any agency without having the need to produce multiple identity documents. Aadhaar would thus be critical to the Government in achieving its goals of Social and Financial inclusion. Well, according to Nandan Nilekani, chairman of Unique Identification Authority of India (UIDAI), Aadhaar is well-on-track to achieve this. In an event organized by Indian Institute of Banking and Finance, he said that there is a massive explosion for bank accounts among people enrolling for Aadhaar or the unique IDs. In fact, if the current pace of enrolments is continued, then there is a real possibility that the number of bank accounts issued in the next four years will exceed the number of accounts banks have issued since Indias independence.

He also expressed his optimism about receiving Finance Ministrys consent on his proposal to make the unique identity number equal to KYC (know-your-customer) norms for the village accounts. KYC norms at present act as the biggest entry barrier for urban and rural poor. If KYC regulation is updated to include Aadhaar authentication, it could turn out to be a blessing for financial service providers. This will enable UIDAI to electronically pass the residents consent along with the demographic information to banks for opening the bank account. This can greatly ease the account opening process with no need for physical documentation. This would not only reduce the customer acquisition cost but would also fasten up the process, while still ensuring strict check on customers identity due to the biometric authentication done through UIDAI.

Aadhaar project is already being implemented as a pilot at Sindhudurg in Maharashtra, where about 2 lakh people have been issued with UID numbers. The pilot project also works as a micro-ATM card, wherein a villager can approach a banking correspondent, who in turn dispenses the cash to the third party on successful verification of Aadhaar records. The financial services is getting disaggregated with newer specialized participants constantly entering the value chain. Still there are many obstacles that the banks face in offering financial services to the poor, especially in the rural and remotest parts of the country. The Aadhaar initiative started by the Government is one of the highly ambitious projects undertaken to remove such obstacles. The scale of the initiative is unprecedented and it will involve active participation of Central and State Governments as well as public and private sector agencies across the country. UIDAI maintains that the pilot project has been a success and that it has reached a tipping point with the launch of the project. Lets hope that same is the case with national implementation as well. What are your views on the Aadhaar initiative?