Given how much money the government loses each year by way of leakages in its R3 lakh-odd crore of annual subsidy- and entitlement-transfers, you’d have thought it would have latched on to the solution the Aadhaar-based payments solution offered it. The evidence so far suggests this is far from true. Not only have Aadhaar-based payments been a disaster in schemes involving district-level officials, they haven’t been a success in the pilot LPG subsidy payments either even though these are run by just 3 government-owned oil firms. The reason, it now transpires, is that the scheme design just didn’t leave enough money on the table for banks who are supposed to set up the banking network, including in villages too small to justify the setting up of a bank branch. Not only was enough money not provided for banks, the banks were being forced to make a payment to the National Payments Corporation of India (by law, NPCI is paid to facilitate transactions) for each Aadhaar transaction.
While this has been sorted out for the moment with the NPCI being asked to waive off all transaction fees for a certain period of time, this is a big design flaw that needs to be fixed. A Nandan Nilekani-headed task force had crunched some numbers to see what kind of money would be required to make it viable for a village entrepreneur to become a banking correspondent and make the necessary investments in micro-ATMs and other such facilities. It came to a figure of 3.14% of each transaction. The government, however, agreed to a 2% figure, leaving little for either the banks or the banking correspondents. It is okay to waste close to a lakh crore rupees each year, taking a conservative 33% leakage figure, but not to pay a fraction of that to ensure the banks and their banking correspondents remain interested in the scheme. A classic example of being penny-wise and pound-foolish.