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Indian banks resist Aadhaar subsidy transfer system


Several banks in India have come out against a platform created by the Unique Identity Authority of India (UIDAI) which would see Aadhaar numbers used to authenticate ID before every transaction regarding bank accounts receiving welfare benefits.

Reported in the Economic Times, the banks’ resistance to this platform is rooted in two main concerns: Banks want the UIDAI to bear liabilities related to false identifications, and the UIDAI wants banks to reconfigure their existing systems to its interoperable solution.

Under the new system, banks will have to pay to use the UIDAI platform and in the interim, many have begun to implement their own fingerprint verification systems. The National Payment Corporation of India will directly send Aadhaar subsidies to banks.

In terms of the liability around false identifications issue, K Unnikrishan, the deputy chief executive of Indian Banks’ Association told the Economic Times that a request made by the banks to rework the agreement with this in mind, has been with the UIDAI for two months.

As we reported last month, 15% of consumers have already provided their Aadhaar details to banks.

Reported previously in BiometricUpdate.com, Aadhaar enrolment has now reached 286.66 million, representing a significant jump, owed widely to the launch of the UIDAI’s direct transfer scheme launched early this year.

This increase is good news to stakeholders in the Aadhaar program, as in May 2012, enrollment stood at only 4.76 million, significantly less than January for example, in which enrolment stood at 24.79 million.

Based on the country’s 2012-2013 Economic Survey, the second phase of the Aadhaar project aims to enroll 400 million residents by 2014.

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2 Replies to “Indian banks resist Aadhaar subsidy transfer system”

  1. If banks want it and can afford it let them enroll customers into their own database and hope to reduce costs. I feel the cost is less if enrollment is done by UIDAI. This liability thing is a bolt from the blue for the UIDAI. UIDAI tried to solve a problem and the banking system creates an unrelated problem for them. The fact is banking system does not have any reach in rural places. Citizens in villages are at the mercy of money lenders. Authentication while withdrawing money is a solution for an entirely different problem and that is fraud. It cannot be a solution for low banking reach. Banking reach can be increased if customers have money credited into accounts something which DBT aims to do. Finally banks might agree to share liability with UIDAI and UIDAI will need help from finance ministry to insure transactions against fraud and consequent liability.

  2. Aadhaar is a very good scheme from the Indian government espcially for the poor people from the country. The scheme has been accepted across the country with open hearts and we should apprciate government’s efforts for such type of schemes. The launch of Aadhaar based Direct Cash Transfer scheme is an addition to benefits of the people as it will reduce the corruption involved upto some extent. The genuine beneficiary will get advantages of the welfare programmes from both the state and the central government.

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