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Our ideas on banking system are extensions of what’s already happening, says Nachiket Mor – The Economic Times

A few years ago, when he was based in Thanjavur after leaving ICICI Bank, Nachiket Mor used to decline requests from the press about financial inclusion, saying he had left that discipline. Over the past few months, however, he has come back into the field. He is on the RBI board. More recently, a committee headed by him just submitted an ambitious report on financial inclusion. ET’s Vidhya Sivaramakrishnan met Mor for a chat. Don’t you think Jan 1, 2016 is too ambitious a deadline? Our first recommendation is everybody should have an electronic bank account. Then the question is why 2016. Because Aadhaar will be done by December 2015. When you get your Aadhaar number, all the details required to open a bank account has already been examined by Aadhaar — address proof, ID proof, everything. So, at the point you are issued your Aadhaar number, you are fully compliant with RBI’s current KYC. If Aadhaar had completed the task today, I would tell you the target is tomorrow. I will give you 100% bank accounts. Because, it is just a database transfer. The more important question is — can I access that account? Can I use that account for something? That’s an issue. It seems to me that giving people across the country a bank account is a trivial matter. The pace at which Aadhaar is going, they might get done before 2015. I accept that many of these accounts may be dormant for sometime. That’s why we have not said anything specific about 2016 — like every bank account will have Rs 5,000 balance. All our targets are district level and pretty modest — 10% credit to GDP ratio, etc. If you look at our status report, already districts are close to that. It’s not that we are saying something that is so far away from what is the truth today. In the report, you rely a lot on Aadhaar. But there has been a cloud over the implementation of Aadhaar and with the recent Supreme Court ruling that it is not mandatory for people, why are you so making such a strong bet on Aadhaar? The number of Aadhaar’s issued already (at 54.62 crore) is about double the current (estimated) banking penetration and they are being issued at the current run rate of about 3 crore per month. States like Kerala are nearing 100% and other states are already between 50 to 70%. The only linkage our report has with Aadhaar is at the KYC end. We express the view that to open an electronic account since all the regulators have already accepted e-KYC and at the time of enrolment the current address is also verified based on approved documents, this is a historic opportunity for us to open bank accounts (a key starting point for financial inclusion) for every individual. If for some reason the Aadhaar machinery stops at 90 crore numbers instead of 100 crore then to the extent getting bank accounts for the balance 10% or so of adults may need an alternate enrolment / KYC strategy. We however express the view that local governments with to pursue financial inclusion then it may be more useful for them to ensure Aadhaar issuance completes ASAP instead of spending time and resources on building entirely parallel structures. In Aadhaar implementation, there have been issues related to biometric identification where fingerprints of the old and the labourers have been difficult to identify and there have been problems related to iris recognition as well. Did the committee take these into account while framing the recommendations? The centrality of Aadhaar in our recommendation is only as far as KYC is concerned and our strategy is not dependent only on fingerprint recognition but is consistent with all the approved methods including PIN and OTP. And, even with KYC we mention Aadhaar only as one of the methods. The reason we stress it a little bit is with a desire to piggy back on the massive enrolment drive that is already in progress so that banks do not once again have to spend the money on finding the customer and then carrying out full pre-account-opening KYC. Otherwise there is no specific unique role for Aadhaar or fingerprints envisaged in the report. There is a general view that people in rural areas are apprehensive about banking, its paperwork and find it cumbersome to transact small amounts in bank branches. How big is that an issue? That’s why I am eager to make sure we communicate this properly. We have no big ideas. Our ideas are extensions of what’s already happening. Business correspondents are already there. Practically, we are finding there are issues. We have recommended a white-label BC (business correspondents) to say if there is a corporate BC, allow them to serve multiple banks. The customer is very comfortable dealing with a BC. RBI has already allowed PPIs (Prepaid Payment Instruments). We are simply saying they are not allowed cash-outs today, allow the cash-outs. Cash-out is equivalent to banking licence. You cannot give cash-out without calling the person a bank. So, it’s a very minor change. We have already four years of experience of PPIs. Our belief is you create a bank account for everybody using UIDAI, you allow PPIs to become cash-in, cash-out, you solve the problem. Because now, the government wants to put DBT (direct benefit transfer), it has an account to put it in, you have a multi-user interface. So, if I have a presence in some remote village in Purnia, a customer walks in, it doesn’t matter whether he is a State Bank of India customer or an Axis Bank customer. It’s like when you go to your ATM (automated teller machine). IBA has already solved the whole issue of interchange charges- who will pay whom how much? That’s already very clear. All we have done is to say put all this together as a solution. And, if you look at today, you already have enough infrastructure. There are enough kirana stores, enough mobile recharge points that can act as BCs, that can act as agents to do this work.
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