New Delhi: Aadhaar has emerged as an enabler for financial inclusion with 76% to 95% of new accounts opened in different states relying on biometric identification but steps are needed to improve continued usage of these bank accounts, says a survey that analysed three-year data from rural Andhra Pradesh, Rajasthan, and West Bengal.
The survey, State of Aadhaar Report 2017-18 done by international research firm IDinsight covering 13,669 household members in 21 districts of the three states between November 2017 and February 2018, noted that only 45%-67% of account holders in these states continue to use them.
Zero-balance accounts opened under the financial inclusion scheme Jan Dhan Yojana is a key tool for the government to deliver entitlements to the intended beneficiary. The survey sought to find out whether Aadhaar had aided unbanked individuals or households in opening a bank account and whether Aadhaar had made bank accounts easier to use, resulting in fewer dormant accounts. Use of Aadhaar, the 12-digit biometric identity number issued by the Unique Identification Authority of India (UIDAI), is likely to widen in future for delivery of public services with the government planning major welfare schemes like the Ayushman Bharat National Health Protection Mission, known as Modicare, that will cover 500 million people.
Despite growing access to bank accounts among Indian adults, the survey found only a subset of accounts were actively in use—66.6% in Andhra Pradesh, 58.1% in West Bengal, and 44.9% in Rajasthan. “The next major challenge in financial inclusion is active participation in the financial ecosystem," the survey said.
“As people start realising the benefits of transacting through the banking channel, gradually usage of bank accounts will increase. It will improve their creditworthiness and access to more financial products," said Kalpesh Mehta, partner, Deloitte India.
The survey also found that although transactions through the use of micro-ATMs and through banking correspondents have been increasing, the “utilisation rates are still low in the three states." In Andhra Pradesh, about a third of respondents who used their bank accounts in the last three months reported having used a microATM. In West Bengal and Rajasthan, it was much lower at 14.7% and 5.1%, respectively.
Low usage levels could be due to implementation gaps rather than the design of the microATM platform, the survey said, adding that the general view held by the respondents was that microATMs offered a better user experience compared to banks.
The study noted that nearly 90% of the respondents who used Aadhaar as an identification document to open a bank account also had another legitimate identity proof before securing an Aadhaar number. “..the high usage of Aadhaar as an identity document for opening an account demonstrates the benefits of having a universal ID — one document that can serve as proof of identity and address and that is widely recognised by both customers and service-providers."
Among those who used Aadhaar for identification, the majority used the analogue form of printed Aadhaar document rather than electronically meeting the ‘know your customer’ requirement. In Andhra Pradesh, 81.9% used it in the analogue form, while 70.7% did in Rajasthan and 48.9% did in West Bengal.
The survey found that though usage of e-KYC or the electronic usage of Aadhaar to verify identities to open financial accounts had tripled in 2017-18 over the previous year, prevalence of e-KYC in opening bank accounts in rural settings was “fairly low."