RBI puts Aadhaar-linked payment mechanism on back burner for now

The move may have been taken due to the uncertainty regarding the future of Aadhaar under a BJP-led regime

GN Bureau | May 22, 2014



After several rounds of negotiations between the RBI and the banks and technology providers on establishing Aadhaar-linked payments mechanism failed to yield results, the banking regulator has deferred the plan for the time being.

According to media reports, the apex bank has asked banks to examine the technical difficulties related to the proposed payment system and decide on the time frame for implementing it. Reportedly, the move comes in the wake of uncertainty looming large on the fate of Aadhaar under a BJP-led government.

The apex bank sent a written communication regarding the new move to the Indian banks’ association (IBA), a consortium of public, private and foreign banks, a banker was quoted as saying. While the plan has not been scrapped altogether, it has been deferred only temporarily, the banker further said.

The RBI had received several complaints from all quarters, including bankers, technology providers and payment experts regarding the feasibility of the plan which would allow customers to use fingerprints to withdraw money from ATMs and pay for purchases.

According to the proposal, once Aadhaar seeding with a bank account is complete, the accountholder can withdraw funds from ATMs, receive government benefits directly into his/her bank account and also make payments using fingerprints.

Bankers had argued that this would require biometric readers being installed on the entire network of ATMs and point-of-sale (PoS) terminals which would be very expensive for the banks. In addition, critics had argued that it was a risky proposition and would be used only by a limited customer base.

The new instructions issued by the RBI, the banker quoted above said, took so much time due to the importance given to Aadhaar by the previous UPA government. With the coming in of a new government, the future of Aadhaar seems quite uncertain, the banker has said.
 

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