Credit Card issuers in a fix over Aadhaar #UID


200 px

 

 

 , TNN | Jun 12, 2013, 06.48AM IST

 

MUMBAI: Credit card issuing banks are in a fix over Reserve Bank of India‘s move to consider Aadhaar as an additional factor for authentication of credit card transactions in shops. The reason – a huge investment in upgrading credit card swipe machines and prospects of losing customers in states whereAadhaarenrolment has been slow.

RBI had constituted a working group headed by Pulak Kumar Sinha, general manager, State Bank of India, to study the feasibility of Aadhaar as an additional factor for authentication of card-swiped transactions and the panel is set to submit its report by the month-end.

The scheduled release of the report will coincide with the deadline which RBI has set for card-issuing banks to migrate to EMV cards and PIN-based authentication for transactions by end-June. EMV cards are smart cards that have an embedded chip, while PIN authentications require card users to punch a secret code on the swipe machine every time they pay by card.

Given the uncertainty over whether Aadhaar-based authentication will come into place, banks have been reluctant to make large investments in upgrading their credit card swipe machines. Also, some bankers say that if Aadhaar-based authentication becomes mandatory, some cardholders may drop out since there is a huge section of the population which has not got an Aadhaar number. As a result, some card issuers may end up missing the June 30 deadline for moving toward an EMV- plus PIN-based authentication.While biometric authentication is secure, card issuers say they have issues with it. For one, since fingerprint images require much higher bandwidth, this will add to the communication costs. Secondly, bankers say that authentication typically requires matching of multiple fingers and this uses up bandwidth as well as time. The biggest hurdle is that this will require over seven lakh point of sales terminals and perhaps automated teller machines to be upgraded and would incur capital expenditure running into thousands of crores.

The introduction of compulsory EMV chip cards and PIN confirmation for transactions was proposed in the wake of widespread credit card frauds that took place earlier this year. RBI had told banks in a circular that they should migrate to EMV and chip cards. Bankers feel that there could be some pressure from the government to push Aadhaar as part of banking transactions, which would make it mandatory for cardholders.

Bankers say that although Aadhaar enrolments are picking up on account of it being made mandatory for LPG subsidy, the numbers are still low in large states like Tamil Nadu and Gujarat.

 

 

 

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.

 

Banking hiccups are the biggest challenge for direct transfer of subsidy #Aadhar #UID


Demanding draft , The Week
By Soumik Dey
Story Dated: Tuesday, December 4, 2012 14:30 hrs IST

Call for change: A tribal woman shows her ration card to get coupons to purchase subsidised rice. AP Photo

The villagers of Kotkasim in Alwar, Rajasthan, recently experienced something for the first time. Direct cash transfer of subsidy, they were told, would be more beneficial than the existing method. Against their purchase of kerosene at market price (unsubsidised), they received three months’ subsidy directly in their bank accounts. But it was anything but beneficial—according to a study by field researchers Bharat Bhatti and Madhulika with development economist Jean Dreze, the amount spent on travelling to banks exceeded the amount they collected as subsidy. Also, the payment of subsidies was erratic and untimely.
Despite the initial hiccups, however, many more bank accounts will be ringing with cash from deposits made by the government in lieu of subsidies from next January. Plans are afoot to provide cash doles instead of subsidising essential purchases by next year. Payouts for farm loans, scholarships and employment schemes would be directly credited to beneficiary accounts even before that.
Is direct cash transfer a better way to give subsidies? Theoretically, yes. It will surely plug the leaks in the messy public distribution system. Also, as Finance Minister P. Chidambaram said, falsification and duplication would be practically eliminated. “I believe it would also result in considerable savings for the exchequer,” he said.
The first phase of the project will be based on Aadhaar identities of citizens in 51 districts in 16 states. It would cover 29 of 42 government welfare schemes. The 12-digit Aadhaar number, which has already been issued to 21 crore people, will suffice as the identity to link it with bank accounts.
But even the very first step—that is the government depositing money in beneficiaries’ bank accounts—could falter unless a few  things are fixed. In a recent meeting with public sector bank chairmen, Chidambaram was told about some “practical problems” that need to be resolved before rolling out the project. The most important concern was about reaching the unbanked people in remote areas, whose livelihoods largely depend on government support.
“To meet the January deadline in 15 states, banks will have to do much. The finance minister has asked banks to speed up financial inclusion for the unbanked districts and blocks by setting up branches or banking 
correspondents,” said D.K. Mittal, financial service secretary at the finance ministry, after the meeting, which was also attended by chief ministers of 21 states. It was suggested that bank employees carry handheld machines and dispense cash to beneficiaries in person.
Initially, the cash transfers would be for farm loans, educational loans, and health and social justice schemes. At a later stage, the system would be used for transferring subsidy for anything from food to fuel. “Anything and everything that is a subsidy will have to be paid through this system. Making electronic transfers for retail purchases is still a big challenge, but we are working on it,” said Mittal.
Banks face another serious problem as well. They would be held responsible if any Aadhaar information leaks, an account gets hacked or a wrong beneficiary manages to get enrolled. “Enlisting correspondents can be done very quickly and at a very low expense. But the main challenge here is having a secure technological network. So far we had partnered with private players to use their networks, but having bank’s own infrastructure would be mandatory for managing subsidy distribution,” said Pratip Chaudhuri, chairman, State Bank of India.
The government has been urging banks to start new accounts even without Aadhaar, but with other relevant documents, and finish rolling out the direct cash transfer of subsidy by April next year. Banks have opened five crore accounts using Aadhaar so far, but will have to open six crore more in just over a month.
The government’s target has largely been accepted by most bank chiefs. However, some of them have said that it could be ambitious on more than one count. “There is also a possibility of enrolling too many fake IDs early on. Without the biometric Aadhaar cards, assuring real identities of beneficiaries would be a problem,” said a public sector bank chairman, who did not wish to be named.
Many states have voiced their concerns about assigning Aadhaar cards as the only recognised identification of beneficiaries. “States do much of the distribution of subsidies aimed at mothers, children and health reliefs for the physically challenged, many of whom may not have enrolled under Aadhaar. Opening zero-balance accounts using Aadhaar cards itself is a very time-consuming affair,” said Sheila Dikshit, chief minister of Delhi,  which has been identified by Chidambaram as one of the states to implement the project in the first phase.
While a lot still needs to be done, the stage is set for banks to become a crucial link between the Centre, states and subsidy beneficiaries. If they can achieve this, the rewards are promising. The government’s annual subsidy disbursal amounts to around Rs.3 lakh crore. Banks surely know that a lot of their problems could be solved with that kind of liquidity in the system.

Technical support

While reaching the unbanked rural population is the biggest challenge before the direct transfer of subsidy, many service providers have already come up with solutions. Delhi-based Starfin India uses a biometric system, with a user-friendly software developed by Tata Consultancy Services, to connect to State Bank of India’s servers. The company identifies people in villages with computer and connectivity, and trains them to use the biometric system and become customer service points.
“Currently we have about 300 villages in our network and are opening about 10,000 no-frills accounts a month in rural and urban areas of five states,” said Jitendra Singh, managing director and CEO of Starfin. “We started a year back and have done about Rs. 500 crore worth of transactions so far.” Starfin charges its users Rs.6 to Rs.12 for deposits and withdrawals.
Beam Money, another such service provider, has RBI approval for using mobile phone networks to make money transfers. “Direct cash transfers can be done through mobile or landline phone connections. Given the documentation and verifications for securing phone connections, they are as secure as using biometric cards like Aadhaar for linking beneficiary accounts,” said Anand Shrivastav, chairman and managing director, Beam Money.

 

#India- Life sentence for stealing #Dalit Students Scholarship


As India rises against corruption a Uttar Pradesh court hands out a life term for stealing Dalit students’ scholarship

Piyush Srivastava   |   MAIL TODAY  |   Lucknow, November 2, 2012

The court also awarded 10 years of imprisonment to Satish Rawat, manager of the school
The court also awarded 10 years of imprisonment to Satish Rawat, manager of the school.
A court in Barabanki district of Uttar Pradesh has awarded life term to the principal of a school for pocketing the scholarships ofScheduled Caste students .Barabanki’s Special Additional Session Judge Kalpana Mishra put the case of Madhuri Sinha, principal of the Bishun Memorial Bal Shiksha Mandir on Dewa Road, in the category of one of the most atrocious crimes and awarded her a life term.The court also awarded 10 years of imprisonment to Satish Rawat, manager of the school. Besides this, the court also imposed a fine ofRs.14000 and Rs.16000, respectively on them.

They had filched Rs.61,920, which was meant as scholarship to the students in 1996-97, by maintaining a register of ghost students in a non-existent school.

The case came to light in 2000 when someone anonymously filed a complaint with the then district social welfare officer Gautam Kumar. After an initial inquiry, he lodged an FIR against the principal and manager of the school for corruption in Dalit students’ scholarship distribution.

Special public prosecutor Ajit Kumar Singh said it is one of the commonest cases of corruption in which the court has sent a very strong message to dishonest people, who line their pockets with public money meant for the poorest section of the society.

“It is a historic judgment which proves that the law is not tooth-less and the dishonest people should be prepared to face such harsh consequences. The timing is also very apt because the fight for an honest system is gaining ground in the country,” Singh told Mail Today.

“The anonymous complaint was received in 2000. In the due course of inquiry, it came to light that the school existed in 1976-77. The school became non-existent after 1977, though a board displaying its name remained. Although there was no student or teacher on its rolls, the principal and manager of the school showed in their records that there were 430 students, all of them belonging to SC. On the basis of this claim, the government releasedRs.61,920 as each dalit student was entitled to a scholarship of Rs.144,” he said.

“Later on, the investigators traced a State Bank of India account in Barabanki which was in the name of Savita. The subsequent inquiry revealed that it was a fictitious name and the account was actually operated by Madhuri Sinha. Satish Rawat was hand in glove with her. So the cases were registered under Sections 419, 420, 467, 468 and 471 of the IPC for cheating and forgery and Section 325 of the SC/ST (Prevention of Atrocities) Act. Now poetic justice has been done with the principal being awarded life term the manager getting 10 years in jail,” Singh added.