'The government is having the right approach, where Aadhaar is voluntary.'
'By the time I stepped down as UIDAI chairman, over 300 million were getting Aadhaar-linked cash transfers.'
'I think PM is very technology-savvy person who understands how to use technology for governance.'
Former chairman of the Unique Identification Authority of India Nandan Nilekani, tells Nitin Sethi and Sahil Makkar how Aadhaar could become the spine for alternative banking and could replace government services with cash benefits.
Excerpts from the interview.
The Congress, which had introduced the UIDAI, is now opposing the Aadhaar Bill.
I don’t want to get into the political discussion. The fact of the matter is that the vision of Aadhaar was a United Progressive Alliance vision.
It began in 2006 and, in 2009, they notified the UIDAI and appointed me in July 2009. They gave me the complete support to implement it.
By the time I stepped down as UIDAI chairman, over 300 million were getting Aadhaar-linked DBT cash transfers.
I think they (the UPA) gave UIDAI a great foundation. They had the vision to start the scheme and the National Democratic Alliance has the wisdom to continue the scheme. Aadhar is a truly a bipartisan instrument.
Have you needed to talk to the BJP and Prime Minister Narendra Modi to convince him about the scheme?
I met the PM once on July 1, 2014, after the elections and discussed with him what Aadhaar can do.
He had a fairly good idea because he had implemented it in Gujarat. After that I had no further discussion with him.
What transpired in the meeting that Modi who was initially opposed to Aadhaar made a complete u-turn?
I will not give myself too much credit. I think PM is very technology-savvy person who understands how to use technology for governance and so on.
My meeting was to tell him my point of view and what I have learnt doing the project.
Do you think we need a separate privacy law as opposition parties have been voicing privacy concerns in the current Aadhaar Bill?
I was the first person to ask for a privacy law. When I came to government then I wrote a letter to then prime minister in May 2010 stating that we need a privacy law for Aadhaar and many other things.
You have the issue of phone tapping and more and more organisations are collecting data like health care records and financial records.
We need an overall privacy law for the country. As far as Aadhaar is concerned, it is the best in class in terms of privacy protection.
The Aadhaar Bill clearly limits the usage of data and it can be shared only with the consent of the user. These are strong and robust privacy protection measures.
The criticism is that a joint secretary can ask for data in the name of national interest. Shouldn’t the government take prior permission of the court?
It is in the interest of national security, which is different from national interest.
The database can be opened if there is a national security situation. There are lots of safeguards. Decision of a joint secretary has to be ratified by three-member committee. There are checks and balances in the bill.
In the name of national security whoever takes the decision has to justify it later on.
You have recently written that Aadhaar can provide spine for the alternative banking system. How feasible it is given the credit crunch in the market?
The current banking system will take many years to unwind. This crisis has been created by about 50 institutions -- 25 banks on one side and 25 business groups on other side. And if you put all the agencies on the bankers be it CBI, ED, CVC, SC, television anchors and all that I guess you are freezing the decision making ability of bankers.
They will neither give loans nor settle old loans.
So, we have created an extended freeze of the banking system, which means if the banking system is frozen from giving credits then the wheels of business will not work. This is not the problem which you solve through monetary or fiscal policy.
This is like pouring sands into wheels of growth. What I proposed through my article was that with technology you can build a delivery system on to a small business or consumer’s smart phone, where he can get his loans approved in a minute using data and algorithm.
Coming back to your question whether there is enough capital to fund this, in my view there is a lot of fresh capital. For example, 21 new banks which are coming up will bring in fresh capital. There are lots of healthy incumbents; there are lots of NBFCs coming in.
There will be no shortage of lending if you have robust lending system. My suggestion involves alternate capital and alternate consumption by small businesses, consumers and world class technology driven ecosystem.
I mean you have to have a plan B. How will you get a high economic growth until you create multiple channels of credit delivery?
The last mile banking correspondent is not functioning on the ground. Are we putting technology before putting other infrastructure?
All these things have to happen simultaneously. In my previous report on payment infrastructure five-six years ago, we had talked about BCs to get adequate commission which is 3.14 per cent with a cap of Rs 15 per transaction.
That recommendation has not been implemented. If you don’t give adequate commission to the BCs through consumers, and instead give it through banks we will not even know if the commission is reaching the BCs.
Hundreds and thousands BCs will come up if the commission is directly paid to them through the consumers.
The consumers can be provided this commission amount along with their other payments or subsidies.
What is the one billion figure means to you personally?
It is satisfying feeling that it in five-six years it has become a live project with billion users from a well-drafted cabinet note.
What are the three big steps required for the Aadhaar to actually take off besides enrolling one billion people?
One thing is to get every subsidy like kerosene, LPG, food and fertilizer in the country to either a cash transfer or BAPU (biometric authentication for physical update) kind of transaction at the Central level and electricity and water at the state level. Then buy the wheat and rice at the market price and give cash support to the farmer through DBT.
Second is the use of Aadhaar platform to create high volume low cost technology enabled credit distribution infrastructure, which will provide credit to those who don’t get credit today.
Third is using Aadhaar for India stat, which allows doing authentication, KYC, and digital storage, to see how India’s government and business can be re-imagined to make it paperless, presence-less and cashless. This will have dramatic impact on productivity, inclusion and economic growth.
As we move forward, do you think Aadhaar be made mandatory?
The government is having the right approach, where Aadhaar is voluntary. It is like having a passport, if you want to travel abroad you need a passport or to drive you need a driving license.
Similarly, if you want a subsidiary from the government you need Aadhaar. It is a perfectly reasonable argument.
Are saying it should be mixed, where government services are involved it should be made mandatory?
No. Only where subsides are involved. If the government wants to streamline the subsidy system, genuine people get the benefits, there is no corruption and wastage is eliminated so that’s a reasonable exemption.
So for services like marriage certification, land records it should not be made mandatory?
I would look at the things where there are some value additions. For land registration one can still argue that it will reduce benami transactions.
Do you foresee the prospects of your coming back to the politics?
I have done my bit and I had an excellent stint. I think it is time for me to go back to private life.
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