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ShareHyderabad: India's unique identification (ID) project is expected to produce first results only after 18 months, but the Unique ID Authority of India is putting forth a proposal to the banking industry to leverage on the citizenry tagging exercise and enhance financial inclusion.
"The unique ID will allow banks to take the banking system to the consumer. We are working on a plan, which would create mini ATMs in every village. We are not adding anything extra to the existing system. All that we would do is to provide authentication of the customer. We will identify X as X for allowing a genuine transaction," the authority's chairman Nandan Nilekani said.
The Reserve Bank of India has been working on appointing business correspondents (BCs) to take the banking system to every part of the country.
The apex bank is also in favour of appointing small shopkeepers and other such operatives in remote villages as BCs.
Nilekani said these BCs would act as mini ATMs for cash transactions at the village level. "Take the case of an NREGA (National Rural Employment Guarantee Act) beneficiary. He gets about Rs 800 per month under the scheme. These beneficiaries are typically in small villages. He has to travel about 40 kms to access an ATM to withdraw his earnings. But once the bank, which has already opened his no-frills account appoints a BC in the village, we can quickly establish a touchpoint for the beneficiary to withdraw his money," Nilekani said.
"As much as 2.5% of India's GDP is in the form of cash. This can be leveraged by banks," he said.
Under this scheme, the BC will be given a biometric reader to scan the fingerprints of a beneficiary.
The Unique ID Authority would have already stored these fingerprints in its database. Using that, the BC will be able to authenticate the beneficiary.
"The beneficiary would give his bank account number and the amount to be withdrawn to the BC, who would check the authenticity of the beneficiary using the equipment that is available with him and pay out the money. The BC would use a biometric reader and a mobile phone to check the ID of the beneficiary," he said.
As the BC pays out the cash that is available with him, the amount would be debited to the beneficiary's account and credited to the BC's account.
"This is no rocket science. The entire back-end required for this transaction is already available with the banking system. We have to only get the front-end in place," Nilekani said.
In fact, he said, several beneficiaries withdraw the entire amount in their earnings at a go currently since the ATMs are not immediately available in the village.
"Once the BC system and the mini ATM facility is available, the number of transactions would increae though the amount of withdrawal would decrease. Since the money is immediately available in the village the beneficiary would withdraw Rs 100 instead of Rs 800 at a time," he said.
Nilekani said the system will be a reality in the next 12 to 18 months and banks will have pull their socks to open as many accounts as possible to increase market share.
It's also a gigantic opportunity for banks to increase low-cost or the so-called CASA deposits, which is the bedrock of their profitability.
"This is the single largest opportunity for the banks to increase market share. The no-frills accounts have already been approved for the sake of beneficiaries under various government schemes. Apart from NREGA, there are schemes like Janani Suraksha Yojana at the centre. There are pension schemes implemented by the state governments."
The unique ID authority is also working on appointing registries for enrolling the citizens for getting their IDs. Banks, state government establishments, oil companies and insurance firms would act as registrars for the ID creation. "We have spoken to LIC. We have also held meetings with oil companies. These entities will start registering the citizens.
Meanwhile, the banks should start appointing the BCs and try out the mini ATM systems with the existing facilities," he said.
The mini ATM equipment is estimated to cost about Rs5,000 per BC, while it would bring down the expansion cost of the banks significantly.
The banks need not set up new branches or ATMs in these villages to increase the number of access points.
However, there seems to be a major glitch in this process of BCs and making them access points for cash transactions.
While the Unique ID Authority is keen on allowing a BC to act on behalf of multiple banks, the RBI is said to be in favour of restricting a BC to a single bank.
"I see no problem in allowing the BC to represent multiple banks. It is for the banks to offer the service through this mini ATM," Nilekani said.
But the banks are notup to speed on appointment of BCs. Currently, there are about 123 BCs appointed all across India.
