Use of Aadhaar for KYC authentication will cut costs

The Centre’s plan to bring the Aadhaar Bill in the Lok Sabha to enable authentication of ‘know your customer’ (KYC) in the financial sector will bring down borrowing cost, according the Minister of State for Finance Jayant Sinha.

The use of Aadhaar as identity proof would reduce KYC costs per transaction from around ₹1,000 to ₹30-40. To ensure that disparity in taxation does not influence an individual’s choice of product from the basket offered by entities controlled by different regulators (ULIP pensions by IRDAI and NPS by PFRDA, for instance), Sinha said that the government was in talks with regulators to iron out regulatory gaps, besides containing the risks that could spread from one sector to another.

The Finance Ministry is identifying sectoral stress, putting in place resolution mechanisms, and planning for bank capitalisation for Basel III norms, said Sinha.

He observed that the government, in its role as a shareholder, had already taken several steps, such as constitution of the Banks Board Bureau for selecting the top management of public sector banks, separated the role of Chairman and MD, and taken steps to enhance capabilities on risk management and project finance under the aegis of the Indian Banks’ Association.

Financial institutions, according to Sinha, should have differentiated winning strategies for value creation and sufficient scale to be globally competitive. He said that consolidation in the Indian banking sector is imminent as a result and that the Ministry is working closely with the Banks Board Bureau towards this end.

Within the banking sector, Sinha said that the Centre has given banking licence to 23 entities as this would enhance competition for deposit-taking (commercial banks, payments banks and small finance banks) besides introducing Unified Payments Interface via mobile phone, which would change the way payments would be made in the future.

Jayant Sinha said discussions with various investors are under way for divesting a part of the government’s stake in IDBI Bank. He was responding to reports of L&T Finance Holdings eyeing stake in the state-run bank.. “Discussions with various investors are underway as far as IDBI Bank is concerned. Let us see how the process unfolds. That is all we can say right now,” Sinha said. Some investors have already undertaken due diligence on IDBI Bank.

Sinha said that he did not agree with RBI Governor Raghuram Rajan’s description of the Indian economy, and reiterated that India remained a “bright spot” in an otherwise gloomy global economy.“In some ways, we are the only ones left shining, a bright spot in the world economy. I am not sure I agree necessarily with what the Governor said yesterday. But certainly, we are the shining star of the world economy,” Sinha said.On Staurday Rajan had said Indian economy was like a one-eyed king in the land of blind.

COMMENT NOW