New Delivery Architecture worth 3,00,000 crore a year is a game changer but faces many issues
A World Bank study released earlier this year enumerated the rot in Indian welfare programmes. About 91% of subsidised grain meant for the poor in Bihar never reached them. Only 32-51 % of the pensions for the elderly, destitute, widows and the disabled reached them.
These are holes that Finance Minister Pranab Mukherjee sought to plug in Budget 2011, when he announced that, in the coming years, all welfare benefits would be deposited into the bank accounts of beneficiaries, starting from June 2012.Seven months on, India's journey towards cash transfers is looking muddled. Too many players. Too many approaches. There is confusion and conflict at each of the four steps to cash transfers: identification, opening bank accounts, payments and transactions.
...and the New Delivery Architecture is Facing Many Issues
Step 1 IDENTIFICATION
Identify beneficiaries correctly Who is doing it? UID was asked to record biometrics for 200 million, National Population Registry for the remaining 1 billion What is the issue? UID wants to do all, by 2017, for 17,000 cr. So does the NPR, which could duplicate expenditure. Unwilling to wait till 2017, some ministries and states are launching their biometric programmes
Step 2 ACCESS
Give them bank accounts or equivalent Who is doing it? The RBI has told banks to open no-frill accounts. Telcos and payment-card companies are pitching for their alternative channels What is the issue? Banks are not keen on no-frill accounts, as they are not viable. And the RBI is not keen on the alternative channels, which also have their own problems
Step 3 PAYMENTS
Authenticate their identity and move the money to their accounts Who is doing it? UIDAI is developing software for both. Banks are moving to full connectivity with each other What is the issue? Accounts managed by banking correspondent (BC) firms for banks are not linked to the overall system. So, how will one know payment has been made to the right person?
Step 4 TRANSACTIONS
Enable them to access their bank accounts Who is doing it? Primarily BCs for now. Others like telcos and payment-card companies want in What is the issue? A village will have only one BC agent, giving him huge clout. Villagers don't have the choice to choose BCs. UIDAI wants a new system where villagers can access their accounts through any agent, any BC, any bank.
Identification issues: UIDAI, NPR and the growing list of identifiers
Ram Sewak Sharma, number two in the government organisation overseeing the national identity drive, cites a family incident to assert the importance of an ID. He comes from a village near Firozabad in Uttar Pradesh, whose government gives Rs 40,000 to a family in the event of its breadwinner's death.
When his cousin passed away, Sharma's sister-in-law received a cheque. But she could not encash it because she did not have a bank account. And she could not open one because she did not have any paper ID-no voter ID, no PAN, no ration card, nothing. "People feel the need for some identity document that is also valid across the country," he says.
The Unique Identification Authority of India (UIDAI), headed by Nandan Nilekani, was conceived to service this need. It would give every Indian a unique number called Aadhaar, which would supercede all existing numbers and forms of identification. After Finance Minister Pranab Mukherjee, in Budget 2011, announced cash transfers as the eventual model to distribute welfare benefits, the UID became the anchor point for this movement of cash: for money to go into the correct person's account, he or she, to start with, had to be identified correctly.
However, increasingly, other arms of the government, both at the Centre and in the states, want their own anchors. The ministry of rural development is planning pilots to test its biometric ID cards for National Rural Employment Guarantee Scheme (NREGS) workers. Orissa and Kerala are using smart cards of the national health programme to identify beneficiaries for other schemes.
The plan to allot UIDs to all Indians is showing scatter, putting under threat its adoption for all cash transfers.
PRABHAKAR MANIPGDM 3 SEM These are holes that Finance Minister Pranab Mukherjee sought to plug in Budget 2011, when he announced that, in the coming years, all welfare benefits would be deposited into the bank accounts of beneficiaries, starting from June 2012.Seven months on, India's journey towards cash transfers is looking muddled. Too many players. Too many approaches. There is confusion and conflict at each of the four steps to cash transfers: identification, opening bank accounts, payments and transactions.
...and the New Delivery Architecture is Facing Many Issues
Step 1 IDENTIFICATION
Identify beneficiaries correctly Who is doing it? UID was asked to record biometrics for 200 million, National Population Registry for the remaining 1 billion What is the issue? UID wants to do all, by 2017, for 17,000 cr. So does the NPR, which could duplicate expenditure. Unwilling to wait till 2017, some ministries and states are launching their biometric programmes
Step 2 ACCESS
Give them bank accounts or equivalent Who is doing it? The RBI has told banks to open no-frill accounts. Telcos and payment-card companies are pitching for their alternative channels What is the issue? Banks are not keen on no-frill accounts, as they are not viable. And the RBI is not keen on the alternative channels, which also have their own problems
Step 3 PAYMENTS
Authenticate their identity and move the money to their accounts Who is doing it? UIDAI is developing software for both. Banks are moving to full connectivity with each other What is the issue? Accounts managed by banking correspondent (BC) firms for banks are not linked to the overall system. So, how will one know payment has been made to the right person?
Step 4 TRANSACTIONS
Enable them to access their bank accounts Who is doing it? Primarily BCs for now. Others like telcos and payment-card companies want in What is the issue? A village will have only one BC agent, giving him huge clout. Villagers don't have the choice to choose BCs. UIDAI wants a new system where villagers can access their accounts through any agent, any BC, any bank.
Identification issues: UIDAI, NPR and the growing list of identifiers
Ram Sewak Sharma, number two in the government organisation overseeing the national identity drive, cites a family incident to assert the importance of an ID. He comes from a village near Firozabad in Uttar Pradesh, whose government gives Rs 40,000 to a family in the event of its breadwinner's death.
When his cousin passed away, Sharma's sister-in-law received a cheque. But she could not encash it because she did not have a bank account. And she could not open one because she did not have any paper ID-no voter ID, no PAN, no ration card, nothing. "People feel the need for some identity document that is also valid across the country," he says.
The Unique Identification Authority of India (UIDAI), headed by Nandan Nilekani, was conceived to service this need. It would give every Indian a unique number called Aadhaar, which would supercede all existing numbers and forms of identification. After Finance Minister Pranab Mukherjee, in Budget 2011, announced cash transfers as the eventual model to distribute welfare benefits, the UID became the anchor point for this movement of cash: for money to go into the correct person's account, he or she, to start with, had to be identified correctly.
However, increasingly, other arms of the government, both at the Centre and in the states, want their own anchors. The ministry of rural development is planning pilots to test its biometric ID cards for National Rural Employment Guarantee Scheme (NREGS) workers. Orissa and Kerala are using smart cards of the national health programme to identify beneficiaries for other schemes.
The plan to allot UIDs to all Indians is showing scatter, putting under threat its adoption for all cash transfers.
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