PREFACE
UIDAI
BASED FINANCIAL INCLUSION IN INDIAThe UID will pave the way for a variety of applications that leverage the
reliable authentication the
UID offers, within their infrastructure. This
document lays out one potential application of the UID — the implementation of
a universal, micropayments solution. Implementing the solution will require the
collaboration of a variety of stakeholders, including banking institutions, the
regulator, and the government.
CHAPTERS
OF THE PROJECT REPORT
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S. No.
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TOPIC
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PAGE NO.
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1.
|
INTRODUCTION
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5-18
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2.
|
REVIEW OF LITRACTURE
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19-43
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3.
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RESEARCH
METHODLOGY
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44-48
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4.
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DATA ANALYSIS &
PRESENTATION
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49-51
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5.
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RECOMMENDATION
& CONCLUSION
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52-53
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· BIBLIOGRAPHY
ACKNOWLEDGEMENT
I take
immense pleasure in thanking Mr. Ashok Parikh, Managing Director,
and Dr. Deepti Bhargav, our Principal for having permitted us to
carry out this project work.
I
wish to express our deep sense of gratitude to my project Guide, Mr. Ashish Adholiya
Sir (Assistant Professor) Department of Management Studies, Shrinathji Institute
of Engineering and Technology, for his able guidance and useful
suggestions, which helped us in
completing the project work, in time.
I am grateful to the authors and writer who provide
the important contents on internet and all the faculty members of, the
silent support received from my parents & my friends who
stood behind all my even or odds situations
to convert any distress into delight, deserves unconditional recognition.
Giradhar
Mumar Maurya
CHAPTER-1
INTRODUCTION
If a country’s growth is to be truly transformational, it must come with economic
access for the poor. However, enabling access for poor residents — to the
economy, its infrastructure, and its institutions — has been a challenge in
India, especially in rural areas. The lack of one form of access in particular,
access to finance, has deeply constrained India’s poor residents. Financial
inclusion gives the poor the resources to migrate for better jobs, invest in
entrepreneurship, and insure themselves against bad times and economic shocks. Without this, they often find
themselves trapped in their circumstances.
The poor rarely consume everything they earn. Given the uncertainty of
employment, and uncertain incomes, they typically save when they can, and
borrow when they need to. In their book, “Portfolios of the Poor”, Collins et
al. [ ] describe a host of different methods poor households deploy at any
given point in time: storing savings at home, with others, or with banks,
joining chit funds, borrowing from neighbours, relatives, employers,
moneylenders, or financial institutions. Many of these informal financial tools
are unreliable and expensive. The UID can play a critical role in enabling
access to formal financial mechanisms, by helping the poor to easily
authenticate their identity to financial institutions. This in turn, can
significantly improve the effectiveness of existing financial inclusion
strategies, and address the last-mile challenges residents now face in
accessing financial services. All financial services (loans, insurance,
pensions, etc.) eventually involve a financial institution making a payment to
a customer or vice versa. For example, in a micro-insurance policy, the
customer makes periodic payments for the insurance premium, and receives a
payment when a specified event occurs. In a micro-pension policy, the pension
fund collects contributions from the customer when young, and makes a set of
payments to the customer in old age.
This poses the challenge of creating a payment system that can handle a
large number of small value transactions. The UID approach to financial
inclusion focuses on the creation of such a micropayments platform, addressing
the last mile problems, streamlining the delivery of government benefits, and
providing Access to finance to those who have so far been excluded.
LIST OF DEFINITIONS:-
1. AADHAAR – Brand name associated with UID.
2. Authentication – The process of verifying the Aadhaar number of a
resident with reference to his biometrics and / or other attributes.
3. Authority – Unique Identification Authority of India (UIDAI).
4. Biometric Data – Refers to the facial image, iris scan and
fingerprints collected by the Registrar from the enrolees based on the
standards prescribed by the UIDAI and by following the process laid down for
the purpose.
5. De-duplication – The process of using the Demographic and
Biometric data collected from an enrollee to check against existing Aadhaar
data so as to avoid duplicate enrolments.
6. Demographic Data – Refers to the personal information collected
or verified by the Registrar based on the data fields prescribed by the UIDAI
and by following the process laid down for the purpose.
7. Enrolment – Refers to the exercise of collection of demographic
data after verification, collection of biometrics, and the allocation of the
UID number after de-duplication.
8. Registrar – The Agency of the Central or State Government or
Local Government comprising the elected rural and urban local bodies Constitutional/
statutory Village Councils or a recognized Non-Governmental
Organization with whom UIDAI has entered into a Memorandum of Understanding
for covering issues related to the implementation of the UID Project.
Organizations such as LIC and Public Sector Banks can also be Registrars.
9. Resident – Normal resident of India.
ACRONYMS
1. BC – Business Correspondents
2. IBA – Indian Banks Association
5
3. KYC – Know Your Customer.
4. KYR – Know Your Resident. Resident’s demographic data captured by
Registrar as part of the defined Aadhaar enrolment process.
5. KYR+ – Know Your Resident plus. Additional resident data capture
by Registrar during Aadhaar enrolment process for their internal usage.
6. RBI – Reserve Bank of India.
7. UID – Unique Identification.
8. UIDAI - Unique Identification Authority of India.
Account opening process details:-
In the proposed partnership,
UIDAI will collect the resident’s information, as part of the Aadhaar
enrolment, and pass on to the bank for opening the bank account. The process
details of information capture and transfer to bank are mentioned below:
1. The registrars will be
responsible for collecting the resident’s information including biometrics and
consent for opening bank account. With the proposed change in KYC
regulations, the bank officials will not need to be present during this process
to sight / verify resident details.
2. The resident’s information
hence captured by the registrar will be electronically sent to UIDAI, where the
Aadhaar number will be generated
post the de-duplication process
to ensure the concerned person has not been issued Aadhaar earlier.
3. The resident’s information
along with the Aadhaar number will be transferred to the bank, as chosen by the
resident, for opening of resident’s bank account. UIDAI will only send the
resident’s following mandatory and conditional/optional ‘Know Your Resident’
(KYR) 20 information to the bank (Optional data may not be available for all residents)
a. Name - Mandatory
b. Date of Birth - Mandatory
c. Gender - Mandatory
d. Address - Mandatory
e. Aadhaar number - Mandatory
f. Photograph Mandatory
g. Father’s/Husband’s Name - Conditional
h. Father’s/Husband’s Aadhaar - Conditional
i. Mother’s/Wife’s Name - Conditional
j. Mother’s/Wife’s Aadhaar - Conditional
k. Introducer’s Name - Conditional
l. Introducer’s Aadhaar - Conditional
m. Mobile Number - Optional
n. Email Address - Optional
The below figure explains the data transfer process in
detail.
ACCESS TO FINANCE TODAY:-
In recent years, India has made substantial progress in broadening
financial inclusion. The growth of business correspondents (BCs) has expanded banking
services in rural India [ , ]. Liberalized branch expansion and ATM policies
have encouraged rural banking, and new business models such as mobile banking
are rapidly emerging. The notion of reduced Know Your Customer (KYC) norms for
no-frills accounts—accounts where bank balances do not exceed Rs.50,000, and
credit does not go above Rs.1,00,000 a year—makes easier for
From exclusion to inclusion with micropayments:-
As a result of this policy, 33 million no-frills accounts have been created
as of March 2012. This preference among the poor for regular transactions in
micro-amounts has led other Indian industries to tailor their products and Services
accordingly, to target this income group. These include telecom company
offerings of ten rupee prepaid top-ups for mobile phones, and the popular two
rupee detergent and shampoo sachets sold by FMCG firms.
National Rural Employment Guarantee Act, which guarantees 100 days of wage
employment a year to every rural household. Janani Suraksha Yojna is aimed at
reducing maternal and infant mortality rates for Below Poverty Line (BPL)
families. It provides young mothers with a cash benefit that is conditional upon
them receiving proper ante and neo-natal care. Sarva Shiksha Abhiyan is a
program for universalising elementary education across the country.
KYC (Know Your Customer) Challenges:-
Even with reduced KYC norms, banks must corroborate
the identity and address of a resident, before they get a bank account.
Prospective customers applying for a no-frills account must consequently
provide identity documentation or letters from local authorities verifying
their identity and residence. These requirements make it difficult for many
among the poor to get a bank account. This challenge is further accentuated for
the migrant poor, who due to their mobility and transitory work are less likely
to have either relevant identity
Documentation or acceptable substitutes.
High Costs:-
Today, despite the network of 82,000 bank branches
of commercial banks ( ) across the country, India’s banks cater to only about
5% of the villages. The cost of this financial distance is paid by the poor
(Box). A visit to the bank for the poor often means substantial travel and
expense, and the loss of a day’s wages. The poor find such costs especially
untenable given their preference for micro-transactions.
Limited Accessibility:-
The challenges that people like
Ram face are not unique to MGNREGS beneficiaries (Box), but are common across
much of rural India, and across government schemes. The lack of a common shared
payments infrastructure across government programs means that beneficiaries
have little choice in where their accounts reside, and have to collect
different payments—GNREGS and Janani Suraksha Yojna (JSY) benefits, Sarva
Shiksha Abhiyan (SSA) salaries, pensions—from different agencies. The distance
beneficiaries are required to travel to various agencies for their money incurs
opportunity costs as well as travel costs.
NOTE:-As a result of
this policy, 33 million no-frills accounts have been created as of March 2012. This
preference among the poor for regular transactions in micro-amounts has led
other Indian industries to tailor their products and services accordingly, to
target this income group. These include telecom company offerings of ten rupee
prepaid top-ups for mobile phones, and the popular two rupee detergent and
shampoo sachets sold by FMCG firms.
National Rural Employment Guarantee Act, which guarantees 100 days of wage
employment a year to every rural household.
Janani Suraksha Yojna is aimed at reducing maternal and infant mortality
rates for Below Poverty Line (BPL) families. It provides young mothers with a cash
benefit that is conditional upon them receiving proper ante and neo-natal care.
Sarva Shiksha Abhiyan is a program for universalising elementary education
across the country.
Facilitation of Government payment disbursal:-
The Inter Ministerial Group’s
report on ‘Delivery of Basic Financial Services
Using Mobile Phones’ published in
April 2010 has recommended that all Government payments should be made through
linkage to Aadhaar number. For this purpose the group recommended an ‘account
mapper’ that would provide linkages between Aadhaar No, mobile number and the
linked bank account details. Aadhaar has the potential to become the universal
linkage for disbursing
Government payments. All
government departments could just issue instructions to their banks with
individual’s Aadhaar number and the amount to be transferred. The linkage of
Aadhaar number to the designated bank account
(Designated by the individual)
could come from the ‘account mapper’.
Figure 1: Facilitating direct transfer to beneficiary
account
Receiving a cash payment: 20 kms a way, 15 days late and only once a week:-
The present
challenges in financial access are well-illustrated in the case of Ram, who
lives in the village Atariya in Bundelkhand.To collect the MGNREG Swages deposited
into his bank account, Rammust walk for an hour and a half to the village of
Kakarwaha, six kilometres away. Three buses everyday ply from Kakarwaha to
Badagaon, 14 kms away,wherethe nearest bank branch is based. Ram can collect
his wages only on the Thursday of each week—the bank has divided the days among
the surrounding villages so as to manage the workload. MGNREGS beneficiaries
must reach the branch before closing time at 2:30 pm, else come again the
following week. The bus fare for Ram costs Rs.10, and them one lender gets cut
of his wages. The costs Ram pays in order to collect the Rs.500 in wages due to
him are substantial. He incurs the loss of a day’s wage, the cost of the bus fare,
and additional interest charged by the money lender. In all, Ramincursa cost of
more than 20%of the benefit, in his efforts to collect the benefit payment.
Source: IndianExpress,September
9,2012.
The costly processes of cash management, cumbersome identity verification
processes and high transaction volumes create inefficiencies across the system,
and a web of delayed payments and long waiting times for the ultimate
beneficiaries. The information asymmetry between the bank and the beneficiaries
on when payments have arrived also gives rise to middlemen, who pass on this
information to the beneficiaries for a price. The net costs that beneficiaries
pay out to access their payments across government schemes and social programs
is estimated to be in excess of Rs.6000 crore. These constraints prevent the
poor from using banking services regularly. If a resident moves away from their
village, their ability to access their money becomes even more challenging.
Today, benefit payments that the poor receive are often tied to their location.
This affects residents in a variety of situations — when they migrate for jobs
to the city and then return to the village, when pensioners move to the village
or town their son/daughter lives in, or when pregnant women move to their
parents’ home for delivery.
Storing savings safely:-
The lack of access to banking
services for the poor also makes the safety of their savings, which the middle
class takes for granted, a challenge (Box). Due to the limited safety of
savings stored at home, the poor resort to
3: Paying a premium for safety:-
Rashid Ul Sheikh, a migrant in New Delhi, is employed as
a mason in the city, and lives in the Kapashera slum. The migrant workers in
the slum are usually housed four people to a room, which makes it difficult for
them to store their
Money and valuables where they live. Migrants often do
not have the documents for a bank account. The ration card they have is often
from the village, and not accepted by bank authorities. Thus, they do not have
a means of storing their savings safely. Rashid consequently gives his savings
to his landlord for safe keeping, who charges him10%tokeepthe money secure.
Other means to ensure the security of their money, including converting it
into investments in gold or livestock, or lending it to friends and family. The
lack of access to institutional services for savings means that the poor pay a
premium to private agents such as moneylenders to store their cash securely and
ensure the safety of their money.
Challenges for banks:-
Banks in India face unique challenges in fulfilling the goals of greater
financial accessibility and affordability for the poor (Box ). In much of rural
India, unbanked regions are those that are sparsely populated, which lack basic
infrastructure, and where large numbers of small transactions is common. As a
result, banks face high costs of customer acquisition; high potential
transactions costs of micropayments; and large expenditures on infrastructure
and IT.
Savings
accounts in Cuddlier:-
A study of no-frills accounts in Cuddlier, a district
that achieved full financial inclusion, revealed some interesting findings,
some of which are consistent with the regulator’s own observations. One aspect
that emerged was that reaching the last mile, and financial illiteracy are the
larges timpedimentsto achieving financial inclusion. The experience of
providing no-frills accounts in this rural district also demonstrated that
these accounts are expensive to create and operate, largely due to the process
being labour-intensive for banks. Since most no-frills bank accounts have very
little balance, banks cannot recoup the account operation costs through float.
The study did however, publish one very encouraging fact: accounts that stay
active haves teadily increasing balances as time progresses.
Source: Cost-Benefit and Usage Behaviour
Analysis of No Frills Accounts : A Study Report on Cuddlier District.
A Tipping Point for Financial Inclusion:-
Today, inclusive growth is a
national priority. Much has already been done by banks, non-bank financial institutions,
regulators, and the Ministry of Finance to achieve financial inclusion. A
tipping point in favour of financial inclusion has now been reached due to the
recent alignment of various policy as well as market factors. The National
Payments Corporation of India (NPCI) has been setup to manage the national payments
infrastructure. It will deploy an interoperable modern payments, clearing, and
settlement infrastructure that can handle large volumes of transactions at very
low cost.
A Conducive Policy Environment:-
The regulator has expanded the
list of entities that can act as Business correspondents (BCs). This list,
among others, includes kirana shops, petrol pumps, self help groups, etc. Thus,
banks either by themselves or along with retail partners such as FMCG firms,
MFIs, telcos can appoint kirana shops, self-help groups, and other similar
entities as BCs. The regulator prescribes outsourcing guidelines that ensure
that there is no conflict of interest when certain banking activities are outsourced.
The Finance Minister, in the 2010 budget speech has indicated converting
several subsidies into direct cash benefits. The government has created two
funds for financial inclusion , which can be instrumental in Scaling up
financial inclusion efforts in the country. Various benefits programs may even
be able to bear part of the capital and operations costs, if an effective
micropayments system can be put into place. Thus, the last mile, which is
expensive to reach, given the country’s large size and geographical diversity,
can be serviced effectively.
A Scalable Model with UID-enabled Micropayments:-
The final piece of the micropayments solution is the UID number. Banks can
leverage the UID enrolment process and infrastructure to acquire customers and
open UID-enabled Bank Accounts (UEBAs). Thus, banks will not have to bear the
cost of biometric devices, or pay for enrolment agencies to travel from village
to village acquiring customers The Know Your Resident (KYR) verification performed by UIDAI will match the
Know Your Customer
(KYC) verification done by banks today. When UID
KYR is accepted as KYC for no-frills bank accounts, banks will save on KYC
costs. Lastly, since a person’s UID will be tagged to every transaction, the
regulator achieves full traceability and accountability. Thus, no trade-off is
required between inclusion and security. The UID-based micropayments model is
similar to the familiar online PoS/ATM world that banks are already comfortable
with. Using similar ideas and infrastructure dramatically brings down
operational costs and risks. The real-time online authentication offered by
UIDAI also provides secure identification of branchless banking customers to
banks at low cost. The current policy and technology environments, combined with
the benefits of using the UID infrastructure as an overlay on the existing
banking infrastructure can usher in an era of ubiquitous branch-less banking.
CHAPTER-2
REVIEW OF LITRACTURE
In the last twenty years, India has undergone a
transformation of its economic and regulatory structures. Policy reforms in
this period have led to the increasing maturity of our markets, as well as
healthy regulation. The emphasis on de-licensing, entrepreneurship, the use of technology
and decentralisation of governance to the state and local level have in
particular, shifted India from a restrictive, limited access society to a more
empowered, open access economy, where people are able to access resources and
services more easily and effectively. But despite these efforts, access to
finance has remained scarce in rural India, and for the poorest residents in
the country. Today, the proportion of rural residents who lack access to bank
accounts remains at 40%, and this rises to over three-fifths of the population
in the east and north-east parts of India. This exclusion is debilitating.
Economic opportunity is after all, intertwined with financial access. Such
financial access is especially valuable for the poor—it offers a cushion to a group
whose incomes are often volatile and small. It gives them opportunities to
build savings, insure themselves against income shocks and make investments.
Such savings and insurance protect the poor against potentially ruinous
events—illness, loss of employment, droughts, and crop failures. However due to
the lack of access to financial services, many of the Indian poor face
difficulties in accumulating savings. To mitigate the lack of financial access
in India, the regulator has focused on improving the reach of financial
services in new and innovative ways — through no-frills accounts, the
liberalization of banking and ATM policies, and branchless banking with business
correspondents (BCs), which enables local intermediaries such as self-help
groups and kirana stores to provide banking services. Related efforts have also
included the promotion of core-banking solutions in Regional Rural Banks; and
the incorporation of the National Payment Corporation of India (NPCI) to
provide a national infrastructure for payments and settlements in the country.
Advancements in technology such as core banking,
ATMs, and mobile connectivity have also had enormous impact on banking. Mobile
phones in particular present an enormous opportunity in spreading financial
services across India. These technologies have reduced the need for banks to be
physically close to their customers, and banks have been consequently able to
experiment with providing services through internet as well as mobile banking.
These options, in addition to ATMs, have made banking accessible and affordable
for many urban non-poor residents across the country. With the poor, however,
banks face a fundamental challenge that limits the success of technology and
banking innovations. The lack of clear identity documentation for the poor creates
difficulties in establishing their identity to banks. This has also limited the
extent to which online and mobile banking can be leveraged to reach these
communities.
UID-ENABLED MICROPAYMENTS:-
A stable and secure channel for the delivery of micropayments will be
central to successful, widespread financial access. A UID-enabled Bank Account
(UEBA) linked to a UID number can provide this channel. A customer can access
their UEBA through a BC operating a handheld micro ATM device. A UEBA
Provides four basic banking features:
1. It provides a convenient store of cash for savings, with a facility for
making electronic deposits and
withdrawals in micro-amounts
2. It is a convenient way to make payments
3. It works as a fast channel for sending and receiving remittances
4. It allows balance queries, and provides a history of transactions
Transactions on the UID-enabled bank account function essentially as a
prepaid system, similar to that used by mobile operators. This enables local
BCs such as self-help groups and kirana shops to offer basic banking services
at low risk to the bank. The customers are already familiar with this model and
comfortable
With paying for talk-time, an electronic good. The BC starts out by
depositing a certain amount with the banking institution. This ‘prepaid
balance’ paid up by the BC to the bank changes with every transaction the BC
makes. It decreases when a customer makes a deposit transaction, when some part
of it is transferred to the customer’s account and increases when a customer
withdraws money. When the customer is making a deposit, he pays physical cash
to the BC, who subsequently makes an electronic transfer from the BC account to
the customer account. When making a withdrawal, the electronic transfer is made
from the customer account to the BC account, and the BC hands out physical cash
to the customer. This transfer from physical cash to its electronic equivalent
has precedence across India—including villages—in the purchase of mobile
prepaid cards. The bulk of mobile subscribers have prepaid subscriptions, and
each time a customer purchases talk-time for his phone in the form of Rs.10 or
Rs.50 prepaid cards, he is exchanging physical cash for electronic cash in the
form of talk-time. The primary advantage of this approach is that even as it
runs electronic transactions at the account level, thus bringing down the costs
of cash management for banks, it also supports physical cash transactions at the
local level—which is an important component of rural banking. This approach also substantially reduces the risk to the bank, since the
cash transacted at the local level is already paid-up by the BC. The banking
institution is consequently protected from fraudulent actions by the BC.
The UID-based micropayments offer stronger compliance with Anti Money
Laundering laws, both to the banks and the regulator.
Identity
Verification:
Residents will be able to verify their identity to
banking institutions easily, in real time and at low-cost, using UID
authentication, which will be available even in rural areas through telecom
networks.
Access to Finance:
Remote verification of identity
will enable local agencies, including self-help groups and kirana stores
equipped with mobile bank devices, to act as BCs. This solves the last mile
problem for the rural poor in financial access, while simultaneously giving
residents choice and mobility. They will have choice among local service
providers, and can operate their bank account anywhere through any BC.
Using the
Bank Account:
With UID-enabled bank accounts, government can
deliver Electronic Benefit
Transfers (EBTs) to the resident’s account. This in
turn, will encourage poor residents to get bank accounts in order to receive
EBTs and remittances. Having banking facilities at the doorstep will encourage
more transactions on th account, rather than withdrawing the full amount, as is
observed in many cases today.
Addressing Challenges for Banks:
Traditionally, banks provide a variety of free
services to their customers. The bank bears the cost of customer acquisition,
the cost of account maintenance, and the cost of all transactions. This is
possible because the bank enjoys the float in the customer’s deposit account,
which covers the cost of these services. No-frills accounts, however, offer
very little float to the bank. Thus, a scalable model for financial inclusion
must be built on a low cost infrastructure, with a transparent per-transaction
pricing model. Banks will need to address the following major challenges to
achieve large-scale financial inclusion.
Customer Acquisition Costs:-
Banks bear an estimated cost of Rs.100 for customer
acquisition for a no frills
Account. The cost of account maintenance is
estimated at Rs.100 every year.
Aligning reduced KYC requirements of no-frills bank
accounts with UID Know Your Resident (KYR) standards and authentication can
ensure that anyone with a UID number is eligible for a UID-enabled bank
account. Customer acquisition costs can come down substantially by leveraging
the UID enrolment and saving the costs of biometric devices and labour. Additionally,
UID authentication ensures that only the eligible beneficiary can operate the
UID enabled bank account. This simplifies and strengthens the security of
transactions, both for the banks and the customer.
Fixed Costs of IT
The existing banking infrastructure is not suited
for no-frills banking. For example, Core Banking Systems (CBS) at banks today,
which are required for electronic transactions, provide for accounts with a
wide range of features, and have formidable fixed and marginal costs for
no-frills accounts.
Given the diversity of core banking platforms and
IT capabilities of banks, adding hundreds of millions of no-frills accounts to
existing core banking systems may be infeasible. A fresh look at hosting
no-frills accounts on new platforms that either the banks implement or
outsource may be necessary to achieve the desired transactions costs. The cost
can possibly be brought down by hosting no-frills accounts on the bank’s
existing CBS, or on a separate dedicated system. Alternatively, banks may
outsource the hosting to a low-cost depository (much like a stock depository).
Transactions Costs:
Transaction costs are also high — it costs a bank
roughly Rs.40 for each teller transaction, and Rs.10 for each ATM transaction.
Passbook updates take time, and increase the cost of labour per transaction.
Technology can be used to bring down the cost of transactions. For instance, mobile,
phone, and internet banking are much cheaper than traditional channels. Further,
costs will fall substantially with volumes, as fixed costs get shared over a
large number of transactions, as has been observed in mobile telephony. A
technology infrastructure that enables a Rs.10 transaction for a cost of say,
10 paisa can help build a high-volume, low-cost model, which is beneficial for
all stakeholders.
THE ROLE OF TECHNOLOGY
Technology is a central part of the micropayments
infrastructure, and essential to a cost-effective solution. The Report of the Committee on Financial Inclusion chaired by
Dr. C. Rangarajan, released in January 2008 made two important
observations with regard to the technology for low-cost financial access:
1. Technology has to enable the bank to go where
the customer is present, instead of the other way around
2. Technology should allow interoperability among
the different systems adopted by different banks.
Technology cannot be an end goal by itself, but a
means to an end. Any technology solution that is deployed for micro payments,
must have the following features:
Interoperability among Banks: Today, with the ATM network, customers of any bank
can withdraw funds from any other bank. Similarly, customers banking through a
BC must be able to access their UID-enabled bank account at any bank, and
operate it.
Cost-effective BC Network: It must be profitable to create and maintain a BC
network for banks. Thus, the devices deployed and the networks created must be
cost-effective.
Leveraging Existing Systems: Today, a significant investment in payment networks
has been made by banks. The National Payments Corporation of India has been set
up to run a pan-India payments, clearing, and settlement network. To the extent
possible, existing technology can be used to minimize time to market and bring
down costs.
Connectivity: UID-enabled micropayments depends on having online
connectivity. This connectivity can be in the form of mobile, fixed line, or
internet connectivity. Mobile connectivity is already improving by leaps and
bounds. Further, recent Department of Telecom initiatives to connect every
Common Service Centre (CSC) and gram panchayat with a high speed fibre optic
network over the next few years will make internet access ubiquitous, making
micropayments and other UID applications feasible across the country. Keeping
the above desirable goals in mind, the following technology solutions have been
proposed. Some of them have been standardized and adopted, whereas others are still
in the conception phase.
Micro ATM Standardization:-
The micro ATM is a device that will be used by a
multitude of Business Correspondents to deliver basic banking services at the
last mile. A committee consisting of representatives of IBA, UIDAI, NPCI,
IDRBT, RBI and various banks was created to define the specifications and use
cases of this device.
The costs of failing to standardize a device like
the micro ATM are quite high as large sections of Indian society will continue
to be left out of the country’s financial system. The telecom industry is
widely regarded for relentlessly driving down costs and bringing coverage to
large parts of the Indian population. Similar success is possible in the
payments industry. The micro ATM is a first step towards providing an online,
interoperable, low-cost payments platform to everyone in the country (See Box
).
The micro ATM device design and system architecture
are influenced by the design of debit/credit card processing on
point-of-service (PoS) terminals, combined with authentication services that
UIDAI will provide.
The micro ATM is deployed by banks either directly,
or through service providers The Micro ATM standards are broad-based,
standards-based, and generic. They are based on a banked model for financial
inclusion, where the UID infrastructure is an overlay on the existing banking infrastructure.
The basic transaction types that the micro ATM will
support are:
1. Deposits
2. Withdrawals
3. Funds transfer
4. Balance enquiry and mini-statement
The objectives of these specifications are to:
Ø Bring down transaction costs
Ø Ensure interoperability
Ø Ensure security and transparency of transactions
Ø Bring down the cost by being compatible with
existing systems
Ø Provide a uniform customer experience
Ø Reduce agent training needs
A UID-enabled interoperable payments switch:-
Choice and mobility are key to the success of
UID-enabled micropayments. A customer should thus be able to go to any BC with
a micro ATM device, and access his account, much the same way as an ATM. It
should not matter if the BC is appointed by his own bank or by a different
bank. Thus, a payments switch that makes this model interoperable is essential.
The National Payments Corporation of India (NPCI) has been formed to switch all
the retail payments and fund transfer transactions in India to a central
Infrastructure. NPCI has defined business lines to process inter-bank transactions
for ATM, PoS, 24x7 remittance, and set up an Automatic Clearing House (ACH).
NPCI will also offer UID authentication on its switches, and has defined
message formats for interoperability. All inter-bank payment messages will be
routed using the architecture showed in Figure. This architecture is similar to
what already exists for ATM and PoS switching, and is used by several banks.
Most transactions in villages are expected to be ON-US transactions, where both
the customer and the BC are from the same bank. In urban areas, and when
customers travel, the inter-bank OFF-US transactions make it possible for them
to access their bank accounts through any BC with a micro ATM. UID-enabled
micropayments will only require minor modifications to carry a biometric
payload in the messages, and the ability to Authenticate from a central
location. The rest of the banking infrastructure remains unmodified.
Figure:-Interoperability architecture for uid-enable
micropayments
A critical part of the UID-enabled micropayments
architecture is the direct deposit of government benefits into the accounts of
the beneficiaries. A government department should be able to disburse benefits
by simply generating a list that contains a UID in one column, and the amount
in another column. At a certain level, this is no different than the payroll of
a firm, where on a given day, money is transferred directly from a firm’s
account to its employee’s accounts. However, what makes this process challenging
is the scale and complexity. Government benefits programs are typically funded
by the Central Government, but implemented by the states. Different state and
local governments park their funds in different banks. The beneficiaries, for
reasons of convenience and access, have their accounts spread across a number
of banks. Two critical pieces of infrastructure are required to implement
UID-enabled disbursement of government benefits:
1. Government departments must have IT systems that
maintain a list of beneficiaries by UID, and track any program specific
information required for disbursing the benefit. At the time of disbursement, a
list of UIDs and amounts are generated and sent to the bank servicing the concerned
government department.
2. A nation-wide payments infrastructure can then
distribute payments into beneficiary’s accounts using their UIDs.
The entire transaction flow is shown. The first
piece of the infrastructure, where the government generates the payment
instruction needs to be put in place in various government departments.
The second piece of the infrastructure, which is
the actual payment, can be handled by a UID-aware Automated Clearing House
(ACH) that is being put in place at NPCI.
Bridging the Last Mile with Mobile Connectivity:-
A million local groups and agencies acting as BCs will put the process of
financial inclusion into high gear across the country. Further gains are
possible by letting customers access their UID-enabled bank accounts through
mobile phones owned either by them or the BC. Mobile phones are fast becoming a
ubiquitous phenomenon across the country, including in rural India, and can
offer people far away from the closest branch of the banking institution affordable access to financial services. They
can serve as simple, secure and reliable links for transactions—their utility
can range from basic information alerts to more advanced cashless person to- person
transactions.
The advantages of such infrastructure are significant:
1. Mobile phones can instantly notify customers of cash transfers from the
customer account to the BC account and vice versa, via SMS. If the customer
doesn’t own a mobile phone, they can make an IVRS call through any available
phone to check if the transaction has been made. Governments can also use the
mobile SMS platform or IVRS to inform beneficiaries whenever money has been
credited into their accounts.
2. A voice-activated system can be used to let customers control every
transaction and be aware of each step in the transaction process. An
interactive voice menu activated either by the mobile phone’s handset keys or
by the customer’s voice can provide users simplified access to informed banking.
3. A mobile phone will also allow customers to place a complaint against
any BC who they think has tampered with the transaction or has short-changed
them, and the transaction can be put on hold.
4. The UID-based mobile transaction will offer real time online
verification and authentication.
5. By combining the ubiquity of mobile phones with a high volume, low-cost
payments network, we will eventually be able to reach a stage of effortless
person-to-person cashless transactions.
Economic resources are used up in running the
banking infrastructure, and in ensuring the safety of customer deposits.
Eventually, indirectly, a customer always bears all the costs. A seemingly
innocuous payment is actually a complex operation. For cash payments, costs
include cash management, security, and foregone interest, among others.
Electronic payments are run by a complex network of service and infrastructure providers,
each of which provides value and adds to the transactions cost.
The central emphasis of the UID-enabled
micropayment solution is that there must be an incentive for every stakeholder
to participate; participation must not be just a social obligation. The pricing
structure plays an important role in setting up these incentives. Unlike regular
banking, the costs of no-frills banking cannot be recovered by banks through
interest income on customer deposits. A transparent transactions based pricing model
is necessary for viability and scalability.
For a given transaction, the transactions cost must
be borne by someone. Typically, the cost is borne by the participant that
derives the greatest utility from that transaction. The cost may also be shared
across participants, if more than one participant derives significant utility
from the transaction. The cost of a payment transaction includes the following
components:
Fixed Cost
of Transactions:
There is a fixed cost to setting up a payments
infrastructure — retail
networks, devices, servers, communications networks
etc. Similar to most IT infrastructure, the fixed costs go down dramatically
with volumes; the total cost gets spread across a larger number of transactions
as utilization of existing infrastructure increases. IT costs also typically do
not increase linearly with increased volumes, making larger volumes more
economical to support.
Marginal Cost of Transactions:
The payments infrastructure is indifferent to the
ticket size of a
Transaction; the IT costs of a Rs.10 transaction
are no different from a Rs.100 transaction. On the other hand, certain
transactions may create externalities. For example, if the cost of withdrawing Rs.10
and Rs.1000 from a BC is the same, some customers may withdraw large sums and
put the BC at a disadvantage. In such cases, pricing, which takes the BC’s
liquidity into account, can align incentives for both, the customer and the BC.
Loss from
Fraudulent Transactions:
Electronic transactions often attract fraud. One
benefit of the UID is that it can dramatically cut down on identity fraud and
reduce the losses from fraudulent transactions. The UID number is thus a public
good that helps drive down transaction costs throughout the financial system.
A possible pricing structure:-
Based on an understanding of the cost of
transactions and BC economics, a possible pricing structure may be As follows:
1. No fees for account creation and maintenance.
Fees are only charged for transactions. Thus, customers receive the benefit of
safekeeping of deposits without paying exorbitant fees.
2. Transactions performed through mobile phones or
the internet should have fixed transaction fees. In these cases, the customer
also bears the cost of accessing the mobile network.
3. A transaction fee can be charged for cash
withdrawals performed through BCs. This fee can be split between the BC and the
bank.
4. Cash deposits can be free.
5. Remittances and payments performed through a BC
should be fixed price as it does not affect the BC’s liquidity. The BC,
however, must be compensated for services rendered (such as for labour and
operating costs).
6. Remittances and payments can be delivered to the
payee after subtracting the fixed transaction fee
The pricing structure here is not prescriptive.
Eventual pricing should be determined by market forces.
In the telecom model, the transaction fee paid to
local retailers is around 2–4%. This fee may have a fixed and a variable
component—such as Rs.2+2%.
This is comparable to free incoming calls. Upon the
introduction of free incoming calls, volumes increased dramatically. Cash deposits
actually increase the BC’s liquidity and are thus preferable.
Benefits for Stakeholders Besides pricing, a significant consideration for
the micropayments solution to work effectively is that there must be clear,
tangible benefits to all stakeholders in the system. There are significant
potential benefits for each stakeholder within the micropayments solution. The
stakeholders — central and state governments, banks, BCs and residents—all
stand to gain by coming together and forming a collaborative ecosystem.
Benefits for Residents
An individual can benefit from the UID-enabled Bank Account (UEBA) in a
number of ways (Box):
1. Residents will be able to access payments, as well as withdraw and
deposit money through any bank or any BC across the country.
2. The UEBA will make it possible for residents to make micro-transactions
in a cost effective manner.
3. The UEBA will enable the delivery of benefits and subsidies through a
single channel to residents in a manner that is faster, more convenient and
transparent.
4. The UEBA allows individuals to send and receive remittances cheaper,
faster, more securely and in small amounts.
5. A UEBA may include a small, initial deposit from the government to the
resident as an added incentive to sign up for the UID.
6. Today, residents moving from their home village or town find it
difficult to access financial services such as loans, because they have no way
of establishing their credit worthiness. With the UEBA, residents will be able
to establish their financial history to banks and agencies, regardless of where
they live.
What changes
for Ram, under the UID-enabled micropayments approach?
For Ram of
Atariya village, the universal micropayment infrastructure will allow him to
easily collect his MGNREGS payment, without travel and the loss of a day’s wages. Here,
Ram will have already registered for a UID number and received it along with a UID-enabled
Bank Account (UEBA).The MGNREGS process will work as before, with the muster rolls
travelling from the panchayat level, to the block level, all the way to the
state. However, unlike the previous scenario, where a cheque may be issued, an
electronic payment is made directly to Ram’s account. If Ram has a mobile phone, he receives an SMS when his pay is credited to his
account
Benefits for Government:-
The inability of the poor to clearly verify their
identities to public and private agencies has prevented central and state
governments from delivering benefits effectively. The proposed micropayments infrastructure
can provide several benefits to the government:
1. The introduction of UID-based verification and
authentication will make electronic benefit transfers faster, cheaper and more
effective for governments.
2. Benefits can be transferred in smaller and more
frequent instalments if necessary, to allow residents to build savings and also
enforce conditions within benefits. For example, the Janani Suraksha Yojana
(JSY) program provides a conditional cash benefit to pregnant women if they accept
proper care. At present, the benefit is delivered in a single amount, at the
end of the mother’s participation in the scheme. With the UEBA, the benefit can
be delivered directly to the beneficiary’s bank account in small amounts, each
time she fulfils a condition for ante-natal or neo-natal care within the JSY
scheme.
3. If the micropayments infrastructure makes access
to a bank account universal, governments can not only transfer benefits
directly to the individual’s bank account, but also tailor different forms of
benefits for residents across the country. This can include ‘restricted cash’
conditional benefits such as JSY, as well as digital vouchers, including
education vouchers for children to attend the school of their choice, and
health vouchers that buy basic forms of health insurance.
Benefits for Banks:-
Taking banking to rural areas has long been considered an expensive
proposition. The high customer acquisition costs, the risks of handling and
moving cash, as well as the large volumes of low value transactions make the
option of setting up rural branches a social responsibility rather than a
business opportunity. The proposed micropayments ecosystem can enable banking
institutions to overcome these challenges as described below:
1. Banks can rely on BCs to reach the country’s unbanked population,
eliminating the need for a physical bank branch in remote areas.
2. ATMs, as they are currently operated by banks require a sophisticated
cash management operation. The BC operation is closer to the lower cost, retail
distribution model for mobile prepaid subscriptions.
3. The introduction of the micropayments solution and the use of a central
switch to make payments electronically will dramatically cut down on the cost
of cash management in the system.
4. The KYC costs for banks can be significantly reduced, bringing down the
customer acquisition cost, as a resident with a UID may require no further
identification to get a UEBA.
5. Every micropayment, remittance and government transfer can be an
additional source of revenue for banks. At high volumes, the transaction fees
generated can offset the marginal cost of hosting UEBAs.
Benefits for BCs:-
Despite being identified by the
regulator as an important route in achieving mass financial inclusion, the BC model
faces various challenges that limit its scale and commercial viability. Cash
management—the logistics involved in handling large volumes of cash and the
operational risks associated with it—remains one of the biggest problems.
Non-operational accounts and difficulties in retaining customers after the
initial transaction, as well as inadequate commissions from banks are also
major setbacks, preventing BCs from recovering their costs. A majority of BCs
as a result, have reported losses and some have even suspended their operations.
To function effectively, BCs will
need to see clear benefits from participating in banking services, which is an important
outcome of the micropayments model:
1. BCs should receive a
commission for every transaction.
2. The commission for providing
physical cash to the resident can be of the order of 2% of all withdrawals. In
the case of government benefits, government can consider bearing the cost so that
the beneficiaries receive the full benefit.
3. This is extra income for the
BC, who may often run a kirana shop, a petrol pump or is a SHG.
4. Increased footfalls as a
result of providing banking services can also translate into more business for
the BC.
5. Banks can team up with FMCG
firms, telcos and other firms with retail networks to provide logistics support
to the BCs, and build a solution that scales.
BENEFITS FOR THE REGULATOR
The online UID-enabled
micropayments model offers several benefits to the regulator:
1. Widespread financial inclusion
is a target that the regulator has set for itself, and UID-enabled micropayments
are a scalable model that can help achieve it.
2. All transactions are done
online and they are reflected in the bank’s systems in real-time. This makes
all transactions transparent to the regulator and reduces systemic risk.
3. All UID-enabled micropayments
have a UID tagged to them, where the UIDAI will have performed KYR verification
before issuing the UID. The UID issued is also unique because of biometric
de-duplication. Thus, strong compliance with anti-money laundering laws is
assured.
4. The real-time online nature of
UID-enabled micropayments mean that anomalies are detected quickly. Customer
complaints can also be dealt with promptly due to electronic audit trails. The secure
biometric authentication provided by UIDAI can greatly reduce fraud, which
reduces the reputational risk for banks and the regulator as compared with
offline alternatives.
OTHER BENEFICIARIES
Ministry of Finance:
A bank account linked to every UID number will
enable the Finance Ministry to
significantly improve the formulation and
monitoring of budgets, subsidies and expenditures. The ability to monitor the
movement of cash can also curb money laundering, and an electronic trail for transactions
will enable bothAMLand FATF compliance.
MFIs:
One of the challenges that MFIs face is in ensuring that the money
collected by their field staff is deposited in banks in a timely and safe
manner.With very limited bank branches in rural areas, MFIs have had to deal
with substantial theft risks. The presence of a BC network and mobile-based,
cashless transactions will avert such risks and increase safety for loan
officers. It will also add to the local cash circulation and increase
transaction revenues for MFI BCs.
CSCs:
100,000+ Common Service Centres are being set up
across the country to act as front-end delivery points for Government, private
and social sector services to rural citizens. Each of these centres is run by
village level entrepreneurs, who can become BCs and gain additional visibility
and income opportunities.
Post Offices:
Post Offices can provide their own unique value by
either acting as ‘Post Office Banks’ that perform regular banking functions, or
be appointed as BCs. Both options will allow Post Offices to increase their
customer base and revenues, and technologically upgrade their operations.
Telecom Companies:
If the mobile based transaction model is adopted,
telecom firms will benefit from the increased customer base, additional demand
and data traffic. The mobile phone companies can also be BC aggregators.
There are many other positive network externalities
that come out of the micropayments solution. We have only outlined the broad
benefits here.
CHAPTER-3
RESEARCH METHODOLOGY
DEFINITION OF RESEARCH –
Research
is the systematic and continuing study and evaluation of all factors bearing on
any business operation which involves the transfer of goods from production to
consumers. “Research is the systematic problem analysis, model building and
fact finding for the purpose of improve decision-making and control in
marketing of good and service “In words
of Clifford Woody –
Management has become a part and parcel of
everyday life, be it at home, in the office or factory and in Government. In
all organizations, where a group of human beings assemble for a common purpose,
management principles come into play through the management of resources,
finance and planning, priorities, policies and practice. Management is a
systematic way of carrying out activities in any field of human effort.
Research compromises of
-
·
Defining
and re-defining problems,
·
Formulating
hypothesis or suggested solutions,
·
Collecting
·
Organizing
and evaluating data
·
Making
deductions and researching conclusions
·
At last
carefully testing the conclusions to determine whether they fit the formulating
hypothesis.
In
short, the research is an original contribution to the existing stock of
knowledge making for its advancement or the search for knowledge through
objective and systematic method of finding solution to a problem is research.
Thus to conclude we can say that “The systemic approach concerning
generalization and the formulation of a theory is also research”
Methods
of Data Collection
The task of data collection begins after a research problem
has been defined. While deciding about the method of data collection to be used
for the study, the researcher should keep in mind two types of data vise,
primary and secondary.
1.
Secondary
Data: - The secondary data are those which have already been collected by
someone else & which have already been passed through the statistical
process.
COLLECTION OF SECONDARY DATA
Secondary
data means data that are already available i.e. they refer to the data which
have already been collected & analyzed by someone else. Secondary data may
ether be published data or unpublished data.
PUBLISHED DATA ARE AVAILABLE IN
·
Various publications of central, state
& local government.
·
Publications of foreign government &
other organizations.
·
Technical & Trade Journals.
·
Reports & Publications. Books,
magazines & newspapers.
·
Reports request by the research scholar
universities economic etc. in different field.
·
Public records and static historical
document and other sources of published information.
Secondary Data possess
following characteristics-
1. Reliability
of data:
The reliability can be tasted
by finding out such things about the said data:
a.
Who collected the data?
b.
What were the sources of data?
c.
Where they collected by using proper method?
d.
At what time were they collected?
e.
Was there any bias of the compiler?
f.
What level of accuracy was desired? Was it achieved?
2. Suitability
of data:
In this context, the researcher must very carefully scrutinize the
definition of various terms and units of collection used at the time of
collecting data from the primary source originally. Similarly, the object,
scope and nature of the original inquiry must also be studied. If the
researcher finds differences in these, the data will remain unsuitable for the
present enquiry and should not be used.
3. Adequacy
of data:
If the level of accuracy achieved in data is found inadequate for the
purpose of the present enquiry, they will be considered as inadequate and
should not be used by the researcher. The data will also be considered inadequate,
if they are related to an area, which may be either narrower or wider than the
area of the present enquiry.
SIGNIFICANCE OF
RESEARCH
·
Firstly, it gives us the conceptual
knowledge in actual environment and prepares the person to use the knowledge
for better way in future endeavors.
·
Secondly, this study exposes the
researcher about intricacies the consumers, thus bringing them face to face
real life problem of handling a consumer.
·
Thirdly, the study places a researcher
in a better position to fully comprehend the various department techniques,
strategic and policies followed by the company.
OBJECTIVES OF
RESEARCH:-
·
To find the
present situation of UID enables micropayments in India.
·
To study
the trends prevailing in UID enrolment in India.
·
To find out
implication of UID enables micropayments in India on individuals.
·
To study
emerging issues of micropayment and its approach towards the development of
curriculum needs of financial inclusion.
·
From Exclusion
to Inclusion with Micropayments
ADVANTAGES OF RESEARCH
·
Helps
focus attention on objectives
·
Aids
forecasting, planning and strategic development
·
May
help to reduce risk of new product development
·
Communicates
image, vision, etc.
·
Globalisation
makes market information valuable (HSBC adverts!!)
DISADVANTAGES OF RESEARCH
·
Information only as good as the methodology used
·
Can be inaccurate or unreliable
·
Results may not be what the business wants to
hear!
·
May stifle initiative and ‘gut feeling’
·
Always a problem that we may never know enough
to be sure!
CHAPTER-4
DATA ANALYSIS AND PRESENTATION
SWOT ANALYSIS
STRENGTH:-
The
unique identification numbers will take into account the database of the poor
and the marginalized people, mostly living in the rural areas. The numbers
will, for the first time, provide an identity to those who need it the most.
WEAKNESS:-
The
Nandan Nilekani led Aadhar project and UIDAI is unconstitutional as it is
neither supported by any law nor it has any safeguards for protecting civil
liberties of Indians. Initially, UIDAI said that UID number would be optional
but now government is making it mandatory both directly and indirectly.
Further, by suppressing the public inputs, objections and suggestions, Indian
government is just proving the points that Aadhar and UIDAI are most offensive
tools of civil liberty violations in India.
OPPURTUNITIES:-
The Aadhar project, running into
thousands of crores, offers many opportunities for IT companies, both in terms
of hardware as well as software that will run the system on a perpetual basis.
The equipment at each enrolment centers costs about Rs. 3 lakh, according to
senior sources in the authority. Multiply this by about 350-400 and you get a
sense of what it costs for a single district. In effect, enrolment in a single
district will cost between Rs. 10 crore and Rs. 12 crore. This does not include
the cost borne by the State machinery in actually getting people to enroll, the
logistics or the administrative expenses.
Information available from the UIDAI shows that many of the top Indian IT firms
have logged on to the Aadhar project in one way or the other. Satyam Computer
Services Ltd., the once venerable IT Company that now functions from the
Mahindra stable, is supplying “biometric solutions” for the authority. The
biometric readers are themselves supplied by L1 Identity Solutions, an American
company, which has been supplying similar equipment to the U.S. Department for
Homeland Security. Accenture, the global outsourcing solutions major, has also
won a contract to implement biometric solutions for the Authority.
Incidentally, advertising company, Percept, is among the entities that have won
contracts from the UIDAI for developing “creative content”. Bharti Airtel is to
supply space for the authority's data centre in Bangalore. Companies such as
Tata Consultancy Services have won multiple contracts. The firm has won a
contract to provide “biometric solutions” as well as for “redesigning,
development, maintenance and support of the UIDAI's Web portal”. In February
2010, Ernst and Young Consultancy Services won the contract to assist the UIDAI
in setting up its Central ID Data Repository and as a provider of managed
services.
THREATS:-
1.Every personal detail of individual will be available at a single point. Bad
people of society will find it lot easier to steal any personal information of
any individual which may use for any wrong purpose.
2. India has been facing various hacking problems from inside and abroad. Many
times our government sites were also being hacked by hackers and Indian
government has accepted some times that some of secret information has been
stolen by hackers. This is very clear that our cyber security is not safe.
3. We are having a lot of corrupted people in India especially in government
department. Everyone know that for money, maximum of government official leak
any kind of information. Then what will be surety of our privacy.
4. It is proposed that UIN will be used as PAN for income tax purpose. If this
happen than PAN will be available easily to any body and one may use other UIN
or say PAN for any transaction. Today at least one can't find easily others PAN
no.
5. It is also proposed that UIN to be used as mobile no. of individual. It
means if one find your UIN any how he may create trouble for you. However I
don't personally think that private mobile companies will let it happen.
6. Village people will be offered Rs.100 for getting their Unique Identity
Number. Every one know very well how project "Narega" got corruption
and to what level. Most of the village people have thinking of just earning money;
they really don't care for country. The greediness Rs.100 may bring such people
in India which have no existence. Further this may also create slightly problem
to our family planning program.
CHAPTER-5
RECOMMENDATIONS, CONCLUSION & BIBILOGRAPHY
RECOMMENDATIONS
This report
makes the following recommendations for steps to be taken towards achieving an
inclusive, high volume, low-cost micropayments solution:
1. The UID-enabled micropayments plan calls for funding the initial fixed
costs of infrastructure to help jumpstart financial inclusion with budgetary
help from the relevant government ministries. The initial infrastructure costs
may include:
(a) Funding for central payment switches and
gateways
(b) Initial costs of micro ATMs in rural areas
(c) Funding the creation of a depository for
no-frills accounts, if necessary
2. Funding of start-up costs for the UID and UID-enabled bank account by
government or other agencies. This may include a small cash incentive for
opening the account and an additional amount for the state as a Registrar to
cover the costs of enrolment hardware and labour.
3. The RBI already offers a Rs.50 incentive for no-frills accounts operated
with biometric smartcards. This incentive may be extended to the UID-enabled
bank account, which would also be a biometric-enabled no-frills bank account.
4. Define the means to host no-frills accounts in conjunction with a
consortium of banks, if necessary.
5. Define device standards and communication standards for transactions
within the micro ATM network in consultation with IBA, NPCI and the larger
ecosystem.
6. Amend rules so that the UID is sufficient to get a no-frills UID-enabled
bank account. This activity may be co-ordinated for pro-poor products across
all regulators viz. RBI, PFRDA, IRDA, SEBI etc.
CONCLUSION
A UID-enabled micropayments solution can help bridge the existing divide
across India in financial services. Today, thanks to the increased focus on
financial inclusion in public policy, financial services in most parts of the
country have become convenient, accessible and well-networked, particularly for
urban, non-poor residents. However, the poor today still face high costs in
opening and accessing a bank account, in making transactions and in receiving
payments. The result for them is lost income and opportunity — a day’s trip to reach
a bank, for example, is a day’s wages lost and expenses on travel that they can
ill-afford. UID-enabled micropayments can fill a large gap within existing
systems of financial access for the poor. The coordination and support this
approach will require from our central institutions, the UIDAI and the central
and state governments is significant. However, if successfully done, the result
will be a well functioning, truly accessible micropayments system. Access to
finance for all — that cherished long-held objective and a turning point for
India as it makes developmental strides—is well within reach.
BIBLIOGRAPHY
[1] Financial inclusion by extension of banking
services—Use of Business Correspondents (BCs).RBI, January 2011. URL-http://.rbidocs.rbi.org.in/rdocs/Notification/
PDFs/68417.pdf.
[2] Guidelines on managing risks and code of
conduct in outsourcing of financial services by banks.RBI, November 2011. URL-http://rbidocs.rbi.org.in/rocs/
notification/PDFs/73713.pdf
[5] Exclusion to Inclusion with Micropayments
http://www.uidai.gov.in/UID_PDF/Front_Page_Articles/Strategy/Exclusion
_to_Inclusion_with_Micropayments.pdf
[6] Daryl
Collins, Jonathan Murdoch, Stuart Rutherford, and Orlanda Ruthven.
Princeton University Press, 2009.Portfolios of thePoor:
How theWorld’s Poor Live on $2 a Day.
