Opportunities in UID for the Banking and IT Industry

There has been a lot of discussion regarding the UID project and the scope of opportunities which exist for the IT industry in general. I would like to present some opportunities in the IT sector resulting from certain financial and banking growth activities which would be occurring. It is important to look at a number of policies and acts of parliament and the convergence thereof to see the potential for large business applications in the very near future. However to understand this opportunities one needs to see the following:

The Unique Identification Authority of India (UIDAI), was established in February 2009 to own and operate the Unique Identification Card (UID). It is an agency of the Government of India. This authority will aim at providing a unique number to all Indians based on simple biometrics.

The Mahatma Gandhi National Rural Employment Guarantee Act or NREGA is an act passed by Parliament aimed at enhancing the livelihood security of people in rural areas by guaranteeing hundred days of wage-employment in a financial year to a rural households. The outlay for this program is about Rs. 40,000 Crore (About $ 9 Billion) for the year 2010-2011.

One of the aims of the UID project is to enable payments to beneficiaries of NREGA and to avoid embezzlement of funds. Now of course the immediate potential application is to merge telecom applications to provide a means of transferring those monies to beneficiaries. A greater attraction could be to offer complete banking solutions to an untapped population of close to a quarter of a billion living in the rural areas, without access to these facilities..

This is made possible by seeing an RBI directive in 2010. The RBI (Reserve Bank of India) has been stressing on banks to increase their reach in rural areas by a policy of “Inclusive Growth”. By its letter dated 28th September 2010, RBI/2010-11/217, DBOD No. BL.BC.43/22.01.009/2010-11, the RBI has specifically extended the scope of Extension of Banking Services through the use of Business Correspondents or agents to act as banking counters. The RBI is offering incentives in the form of reimbursements for each account opened. By using these BC’s there is huge growth opportunity for banks through the following:

a) They get a cheap source of funds for their banking operations.
b) They get partly reimbursed for the administrative cost they incur while the verification is already ensured by UID.
c) They get to fulfil their corporate social responsibility by reaching out to the rural masses.

The benefit for the IT industry lies in the following:

a) Immediate application development for payment gateways, verification systems and other systems.
b) IT Infrastructure development for these BC (Banking Correspondents). India has about 638,000 villages as per the census of 2001. So even if 10% of Indian villages were to have a BC, we are talking of installing close to 63000 such Banking Counters.
c) It costs more than 1 lakh rupees per month to maintain an ATM. Even if it costs one lakh per year to maintain a BC, we are talking of a huge market in maintenance and support.

The vision is there, what we need to do is ensure the successful implementation of all these directives, which has huge business potential and at the same time could help make a huge difference to society.