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Former Aadhaar Chairman says India will experience banking transformation


Nandan Nilekani, former chairman of the Unique Identification Authority of India (UIDAI), the government agency in charge of Aadhaar, recently gave an interview where he claimed that India is now on the cusp of transformation in banking and payments due to the expansion of the biometric database.

Aadhaar, recognized as the world’s largest universal Civil ID program and biometric database, is used by the Indian government to provide social services. To date, Aadhaar has issued over 900 million Aadhaar numbers, and has enrolled approximately 850 million people, with a goal of ultimately enrolling one billion people.

The database is actively used for monitor school attendance, issue natural gas subsidies to India’s rural poor, and to send wages directly to people’s bank accounts. The Indian government spends US$50 billion on direct subsidies, such food coupons for rice and cooking gas, every year.

The Aadhaar system, a landmark legacy project of India’s previous Congress Party government, also provides identification to people who do not have birth certificates. Under Prime Minister Narendra Modi, the Indian government is now seeking to massively expand the program. In its first budget, the government allocated US$340 million to speed the Aadhaar registration process. The new government’s objective is now to enroll 100 million more residents with Aadhaar in an effort to expand social programs offered through the service.

Nilekani noted in the interview: “Aadhaar has really survived and flourished despite political changes. When I stepped down as chairman in March 2014, we kept a commitment that we’ll issue 600 million Aadhaars and we kept our commitment. The new government has embraced Aadhaar. Prime Minister Narendra Modi reviews it every month in meetings, and now it has crossed 930 million. The Supreme Court has not put any restriction on enrolment, so that will continue and will hit a billion soon.”

With wider enrollment, Nilekani predicts that Aadhaar will become a platform for financial transactions since Modi’s government has proposed use of Aadhaar to issue bank accounts to all Indian households. In the interview, he describes the launch of a new private bank, that uses Aadhaar authentication for its state-of-the-art micro ATM, allowing its customers to withdraw money. He notes: “The device was made by a private company, the user was a private bank, and the data verification was Aadhaar’s.” Nilekani said in the interview that these interrelationships were made possible because of the partnership between UIDAI and the National Payments Corporation of India (NPCI), which came into existence during his tenure. The NPCI provides an umbrella platform for all retail payment settlement in India.

Nilekani also said in the interview he was excited about the entrepreneurial opportunities that Aadhaar has created. He noted: “Just like Internet and GPS, where government-related infrastructure ultimately led to the Facebooks and Googles of the world, Aadhaar will lead to a huge number of start-ups in the next 10 years and many of them will become very large.” In the interview, he pointed out that financiers have begun to talk about creating Aadhaar-specific funds.

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