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Monthly Archives: December 2012

in which upa races towards its india shining moment

D-day is 18 days away. On January 1, the Congress-led UPA government will start migrating the delivery of welfare services to a new architecture: straight into an individual’s bank account, verified by a unique identification (UID) number called Aadhaar.

It’s a soft launch. The first of the three stages will unravel in 43 districts where a large percentage of people have bank accounts and Aadhaars. Also, in the programmes earmarked for stage I, worth about Rs 20,000 crore, transfers to bank accounts is already happening; what will change is that they will now be linked to the Aadhaar number to reduce, if not eliminate, duplication.

The complexity of the exercise will increase manifold as more of India is covered in the other two stages, in April 2013 and April 2014. This will also increase as more programmes are added, especially food, oil, fertiliser and employment. In full flow, the money flowing through those pipes could go up to Rs 300,000 crore. So, is the government ready?

It is moving with urgency to tie up loose ends for stage I: opening bank accounts, issuing Aadhaar and matching the two. It is also trying to drum up support. One such private forum on December 17 will see two champions of cash transfers in the government—Jairam Ramesh and Nandan Nilekani—brief the National Advisory Council (NAC) and select members of the media on the government’s plans. Here are six questions, gauging the government’s preparedness for cash transfers, the duo need to answer conclusively…

i am uploading this story late — was in arunachal when this latest magnum opus on cash transfers appeared. anyway, late being better than never, here it is. take a look?

The End of the Silly Common Banking Correspondent Model?

since may this year, i have been tracking a plan from the department of financial services to split india into 20 clusters, and to appoint a common banking correspondent company for all public sector banks operating in each cluster. it is a textbook case of policy adventurism. the department, a part of the finance ministry, has not paused to wonder whether putting one company in charge of all financial transactions of the poor — between the government and them, and amongst themselves — can result in that company developing monopolistic tendencies. something that banks themselves are deeply apprehensive about. strangely, alarm bells did not go off inside the department even when the auctions to appoint BCs started, and bids touched unexpectedly low levels. see this and this.

well. there is good news at the end of all that. as this story reports today…

The government is likely to shoot down the Department of Financial Services’ (DFS) plan to appoint common banking correspondent (BC) companies for transferring cash to poor people and replace it with a country-wide network of ‘micro ATMs’, as it seeks to finalise the last mile payment architecture for cash transfers.

In a meeting on Monday evening, Rural Development Minister Jairam Ramesh, UIDAI chairman Nandan Nilekani, and Planning Commission officials met Finance Minister P Chidambaram to share their reservations about the common banking correspondent model. An official who attended the meeting told ET that it was agreed in-principle to junk this model but a final decision will be taken by the Finance Minister.

In a SMS to ET, Ramesh confirmed the development. “The DFS model is now history. Women SHG, Ashas, anganwadi workers, post offices, teachers, kirana stores, fertiliser shops, etc, can now be BCs,” he said.

the government is now thinking of using micro-atms, as the nandan nilekani report on micropayments had suggested, to make cash transfers reach across the last mile to targeted beneficiaries. whether these will work or not is an open question as well. but that is another story. to be written after another set of field trips. for now, i am glad that this one cluster, one BC model might be on its way out.