Sunday, 19 January 2014


About AADHAR: The Unique Identification Authority of India (UIDAI) was established by Government of India with an objective to implement Multipurpose National Identity Card or Unique Identification Card (UID Card)in India.

This project is part of the Planning Commission and headed by Mr. Nandan Nilekani, a former co-chairman of Infosys Technologies. 

A budget of `3000 crores is allotted for implementation of the ambitious project with an objective to cover 60 crore residents by 2014

It is aimed to issue a unique identification number to all Indian residents with intent:
i. to eliminate duplicate/fake identities
ii. to put hassle-free, cost effective verification/authentication system in place thereby
iii. to save considerable resources of various User Departments as well as beneficiaries at large.

Basics of UID (AADHAR)

i. It will be a randomly generated twelve digit number for every resident of India. Example:2653 8564 4663.
ii. The number will be unique, which means, no two residents will have the same number.
iii. No resident can have two numbers because AADHAAR is based on a combination of standard information like name, address, age and biometric information which is unique to every person.
iv. AADHAR will be used to prove identity not citizenship.
v. It will not be compulsory to get an AADHAAR number

Benefits to the users:

1. The AADHAAR will become the single source of identity verification. Once residents enroll, they can use the number multiple times.
2. The large number of residents, who currently don’t have any identity documents and are therefore  ‘excluded’ from beneficiary lists, can also get an ‘identity’ through the' Introducer' system.

Role of AADHAAR in Banking System:

Aadhaar Enabled Payment System or AePS is an Indian payment system developed by National Payments Corporation of India. Its working is based on unique identification number for individuals called Aadhaar.

The system allows an Aadhaar-holder to carry out financial transaction on a micro-ATM provided by the banking correspondent. It is an initiative towards providing improved social security benefits and financial inclusion of the under-privileged people.

AADHAAR Project - Role of Banks: Public Sector Banks already started entering MOU with UIDAI to act as Registrars for AADHAAR project. Banks are likely to play beyond the role of enrolling agents.

1. KYC compliance: Today, the major constraints faced by the banks while opening of accounts is the absence of valid identity and address proof of the prospective customers and it is causing inconvenience to the public and operational problems to the banks thereby unable to achieve the desired financial inclusion.
Once the project comes to live, AADHAAR number may be treated as substitute for KYC compliance which enables the banks to open accounts with a greater speed and accuracy besides saving of considerable resources.  

2. Micro ATMs: As a step towards financial inclusion, RBI has allowed banks to engage intermediaries i.e. Business Correspondents (BC) to carry out specified financial transactions through Public Call Office operators, Kirana Stores, Medical Shop owners and Fair Price Shop dealers etc.

The intermediaries would be provided mobile phone and fingerprint reader and would act as a Micro ATM where a person could go to any BC across the country to withdraw/deposit money.

AADHAAR could emerge as a payment card linked to a savings account and function as a pre-paid / smart card where the government credits the amount to the accounts directly.

On implementation of the project, banks would have immediate access to many more potential customers at the bottom of the pyramid through Branchless Banking; however, this requires substantial investment in technology.

What are Micro ATMS?  Micro-ATMs are biometric authentication enabled hand-held device (also known as a Point of Transaction [PoT] terminal) .

Micro-ATMs will primarily perform following functions:

1. Cash withdrawal
2. Cash deposit
3. Balance enquiry
4. Remittances

Note: i. These devices will be operated by the Business Correspondents (BCs) appointed by the banks.
ii. The physical currency would be handled by this BC and not a machine like a regular ATM.
iii. All transactions will require online biometric authentication with the UIDAI authentication server in order to be processed.

3. Mobile Banking: The Aadhaar project enables the mobile industry to create a Low-Cost High-Volume ubiquitous transaction platform to penetrate into remote rural areas of the country.

Under this every transaction point will have a mobile phone and a fingerprint reader. The resident having Aadhaar number simply walk in to any point and complete his financial transaction with ease since the service provider gets the authentication from UID online.


1. Brings down the costs of cash management for  banks.
2. Supports physical cash transactions at the local  level.
3. Substantially reduces the risk to the bank, since  the cash transacted at the local level is already paid-up by the BC (Business Correspondents).

Once this model is stabilized, the distribution of financial products and services can be opened up to whoever is willing to invest in a mobile phone and a fingerprint reader. Millions of financial correspondents could be enrolled. The AADHAAR platform enables the banks to provide Virtual Banking.RO

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