Bill Gates, co-chair and trustee of the Bill and Melinda Gates Foundation, speaks as minister of state for finance Jayant Sinha looks on during a panel discussion on ‘Transforming India Through Digital Financial Inclusion’ in New Delhi on Friday. Photo: PTI
Bill Gates, co-chair and trustee of the Bill and Melinda Gates Foundation, speaks as minister of state for finance Jayant Sinha looks on during a panel discussion on ‘Transforming India Through Digital Financial Inclusion’ in New Delhi on Friday. Photo: PTI

Aadhaar can spur financial inclusion by enabling low-cost transactions: Jayant Sinha

Junior finance minister says the cost for meeting know-your-customer rules is too high, which can be brought down using Aadhaar

If India has to achieve financial inclusion, the cost of transactions need to fall—a process in which the Aadhaar unique identity numbers will play a crucial role, junior finance minister Jayant Sinha said on Friday.

Aadhaar can be used to meet know-your-customer (KYC) rules by any financial institution through online biometric authentication, reducing the cost of paperwork.

“We need to get to a price point wherein every stakeholder can participate. Right now, the cost of KYC is too high, which can be brought down using Aadhaar," Sinha said, while talking about the emerging payments infrastructure of the country, including the payments bank in-principal approval issued recently by the Reserve Bank of India, or RBI.

Right now, the barrier to inclusion is cost as most the transactions are of low value and large volume, according to R.S. Sharma, chairman of Telecom Regulatory Authority of India (Trai).

“Digital transactions need to be cheaper as it will be frugal in nature. If mobile companies can enable 10 top-ups and make them sustainable cost-wise, I am sure that with the help of technology, a 10 banking transaction can also be made sustainable," he said.

On 19 August, the central bank gave initial approval to 11 companies to set up payment banks, which includes Airtel M Commerce Services Ltd from the stable of Bharti Airtel Ltd which has a customer base of 235.2 million in September, and Vodafone m-pesa Ltd, a part of Vodafone India Ltd which has 188.1 million customers, and the Department of Posts, which has 155,015 post offices across the country, of which 139,144 are in the rural areas.

Sinha and Sharma were speaking at a seminar, Transforming India Through Digital Financial Inclusion, organized by software lobby Nasscom and Bill and Melinda Gates Foundation, a charity, in New Delhi.

Speaking at the event, Bill Gates said that when paperwork is reduced, the cost of providing services and credit goes down dramatically, as is evident in China and the US.

“It is possible in a digital environment," Gates said.

A constitution bench of the Supreme Court will decide whether the right to privacy is a fundamental right, which relates to the Aadhaar programme.

The bench is yet to be constituted. The apex court had restricted the use of Aadhaar numbers to certain schemes through two orders issued on 11 August and 15 October.

In a written reply in Rajya Sabha on Friday, communication and information technology minister Ravi Shankar Prasad said that Aadhaar is a well-designed and robust data security system is in place. “The architecture of Aadhaar ecosystem has been designed to ensure data security, privacy, non-duplication, data integrity and related aspects. Additionally, security audits are also conducted," he said.

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