Why the Banking Correspondent companies are unhappy with the UIDAI

Today’s ET carries this story about the ongoing tussle between the UIDAI, the body tasked with developing the architecture for delivering cash transfers, and the banking correspondent companies, which will have to do a part of the actual delivery.

Broadly, the UIDAI thinks villagers should be able to access their bank account through any BC terminal and has, ergo, notified a set of specifications which have the BC industry up in arms. They charge that the UIDAI specifications are too narrow and exclusionary — only biometric (so people cannot identify themselves using, say, numeric codes), only online (putting previous investments in smart cards, etc) at risk.

There is merit in both arguments. I am convinced of the need for interoperatability. In the existing dispensation, most villagers can access their accounts only from the local BC agent. Which leaves them entirely at the BC agents mercy. While working on this story, I spoke to a ex-employee of a BC company who told me that 70-75% of the BC agents in Punjab are either sarpanches or their kin. It is BC companies which handle NREGA payments, etc, in Punjab (and elsewhere). And the village elite have figured that becoming BC agents is a ‘soopar’ way to hold onto their hegemony inside the village.

Needless to say, this is also a complete corruption of NREGA which was, remember, pathbreaking in how it took payment away from the guys who were allocating work. And started putting cash right into bank accounts.

Interoperatability would solve those problems by leaving villagers free to go to whichever BC agent they please. And yet, there are questions. How should standards be determined for networks? Take what Abhishek Sinha, the head of EKO, a small BC which lets people access their accounts through mobile phones, says in the story. Public infrastructure, he says, needs to be open and non-prescriptive at the front-end. “Different villagers might be more comfortable authenticating their identity through a card, a phone, a fingerprint or a numeric code. The network should be able to accommodate all those options, and leave room for innovation.”

This is a story I need to drill deeper into. Some of the official reasons why the BCs oppose interoperatability are disingenuous. Among other things, I was told most villagers stay in their own village and so, do not need interoperatability. An argument which, at a time of rising migration, boggles the mind.  Even this assertion of past investments going bad is not true for all BCs. Most of whom already have biometric devices. Further, biometric devices which are more or less already compliant with what UIDAI wants.

Seems to me that the larger threat lies in the proposed move to bring all BC accounts into banks’ core banking software. And in interoperatability. That is the hunch, anyway. Now to see whether it is correct or not.

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