All posts tagged National Payments Corporation of India

Indian Banks don’t want UID involvement #Aadhaar


15 Apr, 2013, 0417 hrs IST, Ahona Ghosh & M Rajshekhar, ET Bureau

MUMBAI/NEW DELHI: The government’s plan to make the Aadhaar number the centrepiece of the cash-transfer system is now facing opposition from a new quarter: banks. Several banks, led by State Bank of India, have expressed reservation against jettisoning their current systems in favour of the platform created by the Unique Identification Authority of India (UIDAI), which issues the Aadhaar number and wants to make it the basis to authenticate an individual’s identity before every transaction in bank accounts into which welfare benefits are deposited.
These new lines of conflict are throwing posers to, and could even delay, what is being seen as UPA’s gambit for the next general elections, due in 2014: universalise cash transfers.

The banks’ reservation to the UIDAI authentication platform, built along with the National Payments Corporation of India (NPCI), a payment gateway, centres around two points.

One, banks want the UIDAI to bear all liabilities related to ‘false identification’ — an individual’s complaint that someone else withdrew money from her bank account. “Till this issue is sorted out, we cannot use this system,” says LP Rai, deputy general manager, rural business (IT-P&SC), SBI.

Two, UIDAI wants banks to retool their respective systems in line with its own, which is ‘inter-operable’ — accountholders can transact on a handheld machine of any bank, as with ATMs now. While some banks, including SBI, accept a common system is the way to go in the long run, they are questioning the need to make this shift today, particularly in the absence of safeguards that protect their interests. “You will hardly find inter-operability in villages,” says K Unnikrishnan, deputy chief executive of Indian Banks’ Association (IBA), the lead grouping of banks.

The current impasse revolves around contingent liability in case of a false identification. “Suppose we go ahead with a transaction because Aadhaar has told us that the person is the accountholder, but the accountholder later tells us it was not him. Who holds the liability in such a case?” asks a senior banker in SBI’s financial inclusion team, not wanting to be named. “Since UIDAI wants to do the authentication, it should also take on the liability.”

A senior manager in UIDAI’s financial inclusion team, speaking on the condition of anonymity, says the rules don’t authorise UIDAI to do so. “We cannot set aside money for such liabilities,” he says. According to Unnikrishnan, a request made by banks to rework their agreement to address this issue has been with the UIDAI for two months.

Banks, which will have to pay to use the UIDAI-NPCI platform, are also wary of dealing with a monopoly. “Who is to say they will not increase their charges? It’s an extra cost for me,” says a senior banker with a large PSU bank, not wanting to be named.

For now, banks are standing by their individual systems, which don’t talk to each other. So, SBI has fingerprinted its accountholders and does its own pre-transaction verification. Other banks have done the same. C Rajendran, executive director, Bank of Maharashtra, says the SBI model is the “only viable solution” for authentication till the issue of contingent liability is sorted out.

AP Hota, chief executive officer of NPCI, says there’s a massive duplication in work and costs if each bank does its own biometrics, maintains its own software and servers, and employs its own force of banking correspondents (BCs) for doorstep banking. “When UIDAI has collected data and we (NPCI) have created a common platform, why should banks duplicate the effort?” he asks.
The UIDAI official quoted earlier says a bank’s BCs can handle transactions of its own customers (termed ‘on us’ transactions), but doubts their ability to handle transactions of customers of other banks (termed ‘off us’ transactions). The latter involves an extra step: a customer’s biometrics are routed from the bank providing the infrastructure to the one with whom the customer has an account. “Banks will not be able to solve it,” says the UIDAI official.

According to Rai of SBI, ‘off us’ transactions are currently only 1-2%, though he accepts that banks will have to migrate to the UIDAINPCI platform to enable inter-operability. SBI has done a pilot that links its system to the UIDAI-NPCI platform, but has not operationalised it because of the contingent liability issue. There are multiple conversations and debates happening on the verification ecosystem. According to Rai, one proposal from the banking regulator is to let banks have their own systems and use the UIDAI-NPCI platform for a second check.

Unnikrishnan of IBA says a migration to the UIDAI-NPCI platform is inevitable. “It will happen, but there is a cost involved and it will take time,” he says. Banks will have to replace the smart cards issued by them and handheld machines in circulation with new ones that are also compliant with the Aadhaar platform.

To drive the adoption of the UIDAI-NPCI platform, UIDAI is offering a 65% subsidy to banks for every Aadhaar-enabled handheld machine they buy. UIDAI will pay Rs 15,000 for every machine, which costs Rs 23,000, but only after a bank does 2,000 transactions on the device. “This will ensure banks actually use the machines,” says the UIDAI official.

At this time, it is not clear how the issue of contingent liability will be resolved and the impasse broken. The UIDAI official says one line of thought is to press ahead without SBI. About 20 banks have signed up with UIDAI to use the Aadhaar platform. “They (the other banks) signed the agreement under pressure,” says the unidentified SBI official quoted earlier. “At a recent meeting, they raised more issues than us.” Eventually, adds the UIDAI official, they might escalate the issue to the finance minister for resolution.

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4 Comments
by kracktivist on April 16, 2013  •  Permalink
Posted in Advocacy, Announcements, Human Rights, Justice, Kractivism, Law, UID
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Posted by kracktivist on April 16, 2013

http://kractivist.wordpress.com/2013/04/16/indian-banks-dont-want-uid-involvement-aadhaar/

Cash transfers: UIDAI’s newest battle is with finance ministry #uid #biometrics #aadhar


200 px

200 px (Photo credit: Wikipedia)

 

 

 

30 OCT, 2012, 05.59AM IST, M RAJSHEKHAR,ET BUREAU

In its short life, the Unique Identification Authority of India (UIDAI) has seen its fair share of skirmishes. Its latest skirmish is with an arm of the finance ministry, thedepartment of financial services (DFS), the genesis of which can be traced back to their different models to make payments.

 
Under the UIDAI model, Aadhaar forms the basis of every transaction. UIDAI plans to capture every person’s fingerprint and iris scan and store it on a central database.

Also read: How Congress can use cash transfers as a main weapon in the 2014 elections

So, when the government transfers money, to avoid duplication, it does so only to Aadhaar-verified accounts. Likewise, for transactions. When a villager wants to, say, withdraw money from her bank account, her fingerprint will be verified on a handheld machine of an agent. That scan will travel for instant verification to the central database.

On verification, the agent gives her the money. The DFS has other ideas. Under its current secretary, DK Mittal, it has been aggressively pursuing its mandate of financial inclusion. A senior official of DFS says, on the condition of anonymity, its thinking is that Aadhaar will take time to reach everyone and that cash transfers can be rolled out without Aadhaar. A senior UIDAI official, who did not want to be named, describes this as a purely “anti-Aadhaar play”.

The DFS plan rides on an architecture created by the National Payments Corporation of India (NPCI), which was set up to create a national payment architecture. This National Accounts Clearing House (NACH) can make cash transfers into beneficiary accounts using their IFSC codes and bank account numbers. This system, which is essentially a beefed up version of the Electronic Clearing System (ECS), can handle 10 million transactions a day now and 40 million transactions per day after six months.

Eventually, says M Balakrishnan, chief operating officer of NPCI, the Aadhaar payments bridge will be subsumed into the NACH. “This will give the government flexibility to use either Aadhaar or bank accounts to make payments,” he says. But the story gets complicated as one moves closer to the field. NACH is not Aadhaar-dependent-it doesn’t use Aadhaar to identify the beneficiary’s bank account, but rather uses IFSC codes and bank account numbers.

As such, it is akin to the systems already being followed by the government to make NREGA payments electronically. District administration and panchayat officials send to the state department a list of those who worked on a worksite, their bank account numbers and the amounts to be paid to each of them. The state department, in turn, asks the lead bank to credit the money into the workers’ accounts.

The UIDAI official says the DFS-NPCI model does not close the payment loop. “Aadhaar has created a system where biometric authentication at the last mile also tells us the correct person got the money,” he says.

“In the DFS system, that loop of confirmation-the targeted beneficiary received the money-will not be closed.” Put another way, the UIDAI system uses biometrics to verify twicewhen money is deposited into an account and when money is withdrawn from it. By comparison, the DFS-NPCI model does it only in the second leg, by verifying biometrics with the bank; in the first leg, it relies on bank account number.

Adds Himanshu, a professor in JNU: “If the government later decides to migrate everything to Aadhaar, we might well find that the biometrics captured by the banks cannot be compared with those in the Aadhaar servers. We might need to capture biometrics all over again.”

UIDAI feels its way is the best. The UIDAI official points out that Mittal of DFS, who has stamped his personality on many recent decisions on financial inclusion, is due to retire in January. The UIDAI, he adds, might wait for him to retire or escalate the matter with finance minister P Chidambaram now. How this plays out will determine the cash transfers architecture that finally takes shape.
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10 Comments
by kracktivist on October 30, 2012  •  Permalink
Posted in Advocacy, Announcements, Human Rights, Justice, Kractivism, Law, Violence against Women, Women Rights
Tagged , , , , , , ,

Posted by kracktivist on October 30, 2012

http://kractivist.wordpress.com/2012/10/30/cash-transfers-uidais-newest-battle-is-with-finance-ministry-uid-biometrics-aadhar/

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