CLSA:: India Strategy -We want M,B,A

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We want M,B,A
While  roti,  kapda  and  makaan were the aspiration of one generation of
Indians, it has changed to  bijli,  sadak and  paani  in  recent  times.  Nandan
Nilekani, believes that Indians will now demand M,B,A – Mobile, Bank account
and  Aadhar. Since its launch,  Aadhaar has enrolled 2.5-3.0mn people with
1.5mn numbers already being issued.  By 4Q2011, UIDAI expects to start
enrolling 1mn people per day. A key challenge faced has been that of trained
operators to collect data. That said, in one of its most ambitious pilot projects
involving Aadhaar enabled bank accounts, UIDAI in Jharkhand has opened
over 50,000 bank accounts with 40-50 online banking transactions taking
place daily with online authentication as part of the proof of concept,
testimony of Aadhaar’s potential to unleash a virtuous cycle of reforms.

Aadhaar: Making good progress
Since its launch in August,  Aadhaar has enrolled (collected data) 2.5-3.0mn
people and issued numbers to 1.5mn people. The enrolments are currently at a
run rate of 100,000/day. Further SBI and LIC are on board and geared up to start
enrolments and Maharashtra is set to launch enrolments in all 37 districts
simultaneously, the first large state to do so. The key constraint has been the
availability of trained operators to collect data. It is now mandatory to recruit
certified operators to reduce data rejection rates. Data rejection rates have
dropped from high teens in the first stages to almost 0% now. UIDAI has on
board 68 registrars including all states and UTs and 26 PSUs. So far within states,
50% of enrolments have come from Karnataka.
M,B,A: Delivery of public services
A key objective of Aadhaar is to improve the delivery of various public services by
the Government. In this context, pilot projects on financial inclusion are being run
in Jharkhand and Bihar. The Jharkhand pilot project is a big success where in
100,000 enrolments have taken place and over 50,000  Aadhaar enabled bank
accounts have been opened with ICICI  Bank. Everyday 40-50 online banking
transactions are taking place with real time authentication to establish the proof
of concept. The transaction time has been brought down from 17 seconds to 7
seconds and the target is to be below 5 seconds. Transactions are timed out in 20
seconds. The cost of opening the bank accounts is the cost of assigning Aadhaar
and thus, makes the proposition viable. As we said in our recent ‘On the road’
note from Bihar, proper identity and authentication is very important for proper
delivery of government services and reducing leakages. M,B,A – mobile, bank
account and Aadhaar number – may help achieve that.
Next steps; long term impact
While the over 50,000 accounts mentioned above may not seem large, it has been
achieved over a period of about 3 weeks, whereas PSU banks in the area had
opened less than 1,500 accounts in nearly three decades in Hazaribagh. While so
far RBIs attempt to push financial inclusion had earlier met with resistance, the
experience of UIDAI in Jharkhand has been very positive. As scale ramps up and
government services and subsidies are delivered by cash transfer or based on
Aadhaar, the impact will be huge – Government’s subsidy burden will likely come
down, targeted people will get their entitlements, and as sense of social well being
and security improves, it will likely unleash a virtual consumption cycle at the
bottom of the pyramid. The government has set up a task force under Nandan
Nilekani to create a way to directly transfer cash to ultimate beneficiaries. As
outlined in our detailed report, “What’s in a number?” the first beneficiaries of this
would be the banking and the telecom sector.