The Unique Identification Authority of India and the Reserve Bank of India are in talks to explore linking the unique identity number with bank accounts to enable cashless transactions at outlets like 'kirana' stores.

The Authority has proposed a UID-enabled Bank Account (UEBA) which will give customers access to their account through Business Correspondent (BC) operating a handheld microATM device.

Transactions on the UID-enabled bank account function essentially as a prepaid system, similar to that used by mobile operators.

"This enables local BCs such as self-help groups and kirana shops to offer basic banking services at low risk to the bank. The customers are already familiar with this model and comfortable with paying for talk-time, an electronic good," the Authority said.

Explaining the process, UIDAI said the BC starts out by depositing a certain amount with the banking institution.

This 'prepaid balance' paid up by the BC to the bank changes with every transaction the BC makes.

It decreases when a customer makes a deposit transaction, when some part of it is transferred to the customer's account, and increases when a customer withdraws money.

"When the customer is making a deposit, he pays physical cash to the BC, who subsequently makes an electronic transfer from the BC account to the customer account. When making a withdrawal, the electronic transfer is made from the customer account to the BC account, and the BC hands out physical cash to the customer," the Authority said.