RBI De­fers Aad­haar-linked Pay­ment Plan

Cen­tral bank asks banks to ex­am­ine the tech­ni­cal dif­fi­cul­ties of the pro­posed pay­ment sys­tem and the time frame to im­ple­ment it

The Economic Times - - Companies - SU­GATA GHOSH

For the past one year bankers have been try­ing to tell the Re­serve Bank of In­dia (RBI) about the draw­backs of an am­bi­tious plan to let cus­tomers use fin­ger­prints to with­draw money from ATMs and pay for pur­chases. It is ex­pen­sive, risky and would serve only a hand­ful of clients, they ar­gued. Chief tech­nol­ogy of­fi­cers and pay­ment ex­perts told the panel ex­am­in­ing the project that it made no sense — the net­work has to be over­hauled and ATMs and point-of-sale (POS) ma­chines with mer­chants have to be up­graded with bio­met­ric read­ers. Their views were ig­nored, thanks to the pre­vi­ous govern­ment’s em­pha­sis on Aad­haar, which is based on bio­met­ric val­i­da­tion. In Novem­ber, RBI di­rected that all new ATMs and POS ma­chines should be tai­lored to ac­cept Aad­haar. Bank CEOs op­posed the move, but there was no hint that RBI would re­think. How­ever, a fort­night ago, RBI told banks — per­haps due to the un­cer­tainty of Aad­haar un­der a new govern­ment — to ex­am­ine the tech­ni­cal dif­fi­cul­ties of the pro­posed pay­ment sys­tem and the time frame for im­ple­ment­ing it. “This was com­mu­ni­cated by the reg­u­la­tor to In­dian Banks As­so­ci­a­tion...While the project has not been scrapped, it has been kept in abeyance,” said a banker. IBA is the as­so­ci­a­tion of bank man­age­ments. “It took a while for RBI to take the de­ci­sion…that we be­lieve is be­cause of the im­por­tance that the UPA II govern­ment had placed on Aad­haar. It was a favourite project un­der Nan­dan Nilekani, who ev­ery­one thought was very close to the power cen­tres. The panel’s re­port was not made pub­lic,” he said.

As per the orig­i­nal pro­posal, once a per­son with an Aad­haar card asks the bank to link the 12digit Aad­haar num­ber with his/ her bank ac­count, it would en­able the per­son to with­draw funds from ATMs, re­ceive gover nment ben­e­fits di­rectly to the bank ac­count as well as make pay­ments by us­ing fin­ger­prints.

Banks felt all this can be achieved with ex­ist­ing tech­nol­ogy and there was no need to spend hun­dreds of crores to set up a new net­work. Also, there are tech­ni­cal hur­dles: “Data on mag­netic swipe of a credit/debit card is trans­mit­ted through tele­phone lines. Bio- met­ric data will need high speed con­nec­tion and the band­width and ca­pa­bil­ity has to be raised. Be­sides, in bio­met­ric mode, re­sponse time and re­jects may be higher and trans­ac­tion could take longer,” one of the ser­vice providers told ET. Be­sides, there are not enough man­u­fac­tur­ers to sup­ply ATMs or POS that ac­cept tra­di­tional cards with mag­netic stripe, EVM pin and chip (a re­cent tech­nol­ogy), as well as fit­ted with bio­met­ric reader for ac­cept­ing Aad­haar-based trans­ac­tion. But UIDAI, the agency that is­sues Aad­haar, is of the view that Aad­haar-based pay­ment tech­nol­ogy can be cost ef­fec­tive and ben­e­fi­cial as it will take elec­tronic pay­ments to the masses.

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