Monday 22 October 2012

Financial Inclusion : The vital Aadhaar



 With the advancement of technology in all walks of life, it is praiseworthy that Govt. is up to providing digital identity through Aadhaar to the people of country. It climbs a further step by enabling the citizens to use this Aadhaar identity for the purpose of gaining various benefits and services provided by Govt. or private agencies. If you turn your back on the political motive, the intent behind direct cash transfer of subsidies to the beneficiaries seems to be absolutely a commendable step taken by Govt. In theory, this Aadhaar-enabled-service-delivery may put an end to the problem of bogus beneficiaries and a resultant leakage of valuable resources.  Aadhaar can become a launch pad for the final destination of direct cash transfer of subsidies to the needy, provided the challenges of implementation and financial inclusion could be dealt swiftly in mission mode.
The Unique Identification Authority of India (UIDAI) is responsible for providing a 12 digit unique bio metric identification to all Indians.  Poor and underprivileged may also avail social benefits through this identity number via banking services, which most of them are devoid of till date. But providing Aadhaar card to every beneficiary is an uphill task  in the first place. The expedite expansion of the system of Aadhaar-card distribution in far off places is a huge challenge, to begin with. First Aadhaar Number was issued in a remote tribal village of Maharashtra in September, 2009. The Unique Identification Authority have registered more than 24 crore people in the country since two years. So far, 200 million people i.e.about 16% of India’s population have been issued Aadhaar numbers. UIDAI has set the target of providing Aadhaar no. to the 60 cr people in the first phase. It means at least one of three Indians will possess a unique identification (UID) number by next year. It is easier said than done given the procrastinating administrative set up.  
The government is rolling out Aadhaar Enabled Service Delivery initiatives in 51 districts across the country. Aadhaar-enabled applications will be used for making pension payments, MNREGA payments, PDS distribution and scholarship payments, among others. The Govt. is in tearing hurry to start cash transfers though a host of states have a negligible presence on Aadhaar map.  Asymmetric distribution of Aadhaar in the country is a major challenge the mechanism is facing now. A full scale nationwide implementation of Aadhaar is critical to meet the deadlines set by Govt for direct cash transfer of subsidy. Expansion of Aadhaar will now solely depend on the pro-activeness of state governments. It is a humongous task on the part of the Govt. to feasibly encompass all the states in the implementation of its ‘dream project’.
 The not-so-expanded banking system poses another risk to the full scale implementation of direct-cash-transfer mechanism. A close to 60 percent of India’s population is un-banked. Not many people in India yet hold a bank account, while  rural branches network of banks is meager and yet to be computerized fully. It will be tough business call for the banks to go for a massive investment in social banking and financial inclusion amid the pressure on margins and rising of bad debts. Banks are unwilling to bear the cost of opening up branches in remote areas without a proper business preposition. The moot challenge is how to strike a fine balance between banks' profits and social responsibility.  The direct cash transfer of subsidy can never function in the absence of all pervasive banking system.
 Subsidy payments and benefits under different schemes amount to nearly Rs.3 trillion, roughly 3.5% of the gross domestic product, according to government estimates. This can only be contained when we a have a robust identity data of the targeted populace and a widely spread banking network. Aadhaar has solved a major problem of giving an identity to the faceless beneficiary but fact remains that it is still a pilot scheme. A noteworthy reduction in subsidy shall only be possible if the Aadhaar becomes a mission via meticulous planning and quick implementation.

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