Nilekani team moots ATMs for payments via Aadhaar

Nandan Nilekani-led task force on an Aadhaar-enabled unified payment infrastructure has recommended setting up a network of one million interoperable micro-ATMs across the country.

The ATMs will be operated by business correspondents. The task force, headed by the Chairman of Unique Identification Authority of India, submitted its report to Finance Minister Pranab Mukherjee on Thursday.

The panel has suggested that in order to set-up this network quickly, a last-mile transaction fee of 3.14 per cent with a cap of Rs 20 a transaction be paid by government to banks for government payments.

This will also lead to positive network externalities such as reduction in leakages and help in achieving financial inclusion.

The panel's suggestions is significant as a road map for creation of Aadhaar-based payment mechanism for direct cash-transfer of subsidies and entitlements to the people under government schemes is likely to be announced in the Budget.

The report has stated that beneficiaries of social safety net programmes, including Mahatma Gandhi National Rural Employment Guarantee Scheme and recipients of direct subsidy transfer payments in the case of LPG, fertilisers and kerosene, can greatly benefit by receiving payments electronically - directly into bank or post office accounts.

It has stressed that the department of revenue notify the acceptance of electronic Aadhaar authentication as proof of identity and proof of address, on a par with document based verification in the Rules of the Prevention of Money Laundering Act, 2002.

It wants the government and financial regulators to recognise electronic Aadhaar biometric authentication as equivalent to a physical signature.

The task force has recommended that over a period of time, all payments of government over Rs 1,000 should be made or received electronically. It has suggested adoption of Government e-Payments Gateway (CGA) to enable straight-through processing and release of funds from ministry of finance to the line ministries.

The Aadhaar account opening and authentication platform would provides electronic account opening capability along with real-time authentication of residents in the chain. Further, Aadhaar Payments Bridge - an interoperable system for transferring funds into accounts at banks and post offices on the basis of Aadhaar number - would be the next link in the mechanism suggested by the task force.

Next in the line would be the micro-ATM network through banks and India Post. Use of mobile banking is also suggested in the model to provide self-service banking capabilities.

The finance minister accepted the task force report in-principle and said that necessary steps would be taken to implement the recommendations.