UID/Aadhaar
Public Interest Exclusive
How Aadhaar linkage can destroy banks

Even if Aadhaar numbers were proof of identity, which it is not, its use to make money transfers make financial transfers un-auditable, propagate money laundering and financial fraud. There is no justification for introducing an unverified and un-audited number to allow payments and settlements


The Reserve Bank of India (RBI) is empowered by the Payment and Settlement Systems Act, 2007 to regulate various payment systems in the country. About 59 organisations are authorised by the RBI under this Act for setting up and operating payment systems in India. In its vision document 2012-15 the RBI states its mission is “to ensure payment and settlement systems in the country are safe, efficient, interoperable, authorised, accessible, inclusive and compliant with international standards”. In compliance with international standards, therefore, all key systems should be secure (that is, have access controls, be equipped with adequate safeguards to prevent external intrusions, and provide audit trails), reliable, scalable and able to handle volume under stress conditions.

A payment can be effected through electronic funds transfers and includes point of sale transfers, ATM transactions, direct deposits or withdrawal of funds, transfers initiated by telephone, internet and, card payment.

When you use your banks online banking to transfer money from your account to a recipient you use a system called National Electronic Funds Transfer or NEFT. NEFT is RBI’s own electronic money transfer system. Your money is transferred to the recipient's account in the hourly schedules to settle the payables and receivables from each bank that result from all the NEFT transactions in the hour. In case, your transfer fails, your money is back in your account. If you make larger transfers, say Rs2 lakh and above, then you will have to use RBI’s Real Time Gross Settlement or RTGS system to make the transfer. In this case the gross amount is moved from your account to the recipient account directly. In case the transaction fails your money is reversed back to you.
 
You need to be logged into your bank account to initiate an NEFT or RTGS transfer. Only a valid bank account can receive funds making electronic transfers the bank. The transfers leave a permanent audit trail that inhibits money laundering.

NPCI’s electronic money transfer system

The National Payments Corp of India or NPCI, a section 25 company, also runs its own payment system. The Aadhaar-Enabled Payment System or AEPS, as it is called, facilitates the deposit of money to and withdrawal of money from Aadhaar-Enabled Bank Accounts (AEBA). AEBA accounts are bank accounts where an Aadhaar number is mapped to the bank account. This is done by a process called as “seeding” an Aadhaar number to a bank account with designated banks.

After receiving the Aadhaar number from the customer, the bank uploads such numbers’ into a “NPCI mapper” or a repository of Aadhaar numbers used for the purpose of routing transactions to the destination banks. The NPCI mapper contains Aadhaar number along with an Institution Identification Number or IIN, a unique 6-digit number issued by NPCI to the participating bank. If you or anyone else change the bank account associated with your Aadhaar number only the current banks’ IIN will be associated with the Aadhaar number.

Now you are all set to make deposits, withdraw money and even make money transfers from the Aadhaar Enabled Bank Account by providing the source and destination IIN and Aadhaar number.

Financial Inclusion?

Banks can appoint a “Business Correspondent” to provide access to basic banking services using a micro-ATM. These include the ability to take deposits, dispense cash for withdrawals, process funds transfers, or answer balance inquiries. The Banking Correspondent is the “last-mile” to replace the village money lender. The Banking Correspondent only collects money or hands it out from his own account with a parent bank. The Banking Correspondent may issue a receipt for the transaction. There is no passbook for AEBA. There are only receipts of transactions. The parent bank has nothing to do with payments to or from individual accounts. It only settles payable and receivable to the Banking Correspondent.

 

The UIDAI explains that “The resident would be allowed the option to either open a new bank account or link an existing bank account to Aadhaar at the time of enrolment. Also, the person can always approach the bank concerned for linking the existing bank account to Aadhaar”. Such accounts are not subject to the requirements of the Anti-Money Laundering Rules. The banks have been pushed to open AEBA accounts repeatedly by the RBI. Through its circular no 17015/14/2012/FI dated 06 February 2014 the UIDAI enabled the process of opening new bank accounts through micro ATMs or linkage of existing bank accounts with Aadhaar.

Rupay Cards

The Rupay card,  a pre-paid debit card, was launched as the Dhan Aadhaar card in December 2011. It has been co-branded with different financial institutions with differing operational requirements and fees . Some of these cards are branded as pre-paid cash cards and do not require a bank account. Since all Rupay cards would require the ABPS it is no surprise that all banks were pushed to enable biometrics and Aadhaar to enable the Rupay. When there was some resistance to burden all account holders with this new infrastructure pin-based Rupay have been introduced.

From the limited information available on the specifics the Pradhan Mantri Jan Dhan Yojana launched on 28 August 2014 promises an Aadhaar Enabled Bank Account (AEBA), a Rupay Debit Card and the Accident Insurance cover most banks were offering with the Rupay Debit card.

It is therefore surprising to learn that that 2.5 crore accounts have been opened without any website that details the eligibility, benefits and operational details; unless the procedure was no different from the Dhan Aadhaar card and AEBA of the United Progressive Alliance (UPA). The Prime Minister's Office (PMO) appears to have been misled completely.

The risks of Aadhar-enbaled Payment System (AEPS)

The AEPS is based on the following premises.

1. An existing account number and IFSC code that uniquely identifies a branch of any bank are not sufficient to do a legitimate transaction.
2. An account not linked with an Aadhaar number lacks the KYC or may be a fake account.
3. An account linked with an Aadhaar number is genuine and cannot be a fake one.
4. Auditability of Aadhaar number to Aadhaar number bank transfer is identical to an account number to account number transfer.
5. The costs of ABPS are less than the costs of NEFT or RTGS.

The RBI should close down RTGS and NEFT if assumption 1 is true. It is completely unclear why a third party number should be associated with a genuine account for identifying the account or the branch.

If assumption 2 holds and accounts not linked with Aadhaar are fake ones, or lack KYC, the RBI should be closed down for having enabled such accounts and money transfers within and between them in India. It is surprising that the Government of India does not trust these accounts when it comes to transferring any benefits when its Income Tax department has used them all along to assess income and even make refund payments.

Let us examine assumption 3. When the Aadhaar number is merely a 12-digit number assigned to demographic and biometric data submitted by private parties; it cannot be a proof of identity, address or even existence. There has been no verification or audit of the Aadhaar database and therefore it is very conceivable that, as was the case of Satyam, huge number of non-existent persons is assigned an Aadhaar number. There is no basis to regard any bank accounts linked to an Aadhaar number as belonging to genuine or even existing individuals.

Let us examine assumption 4. It is impossible to change the beneficiary in an account number to account number transfer. It is however possible to re-associate an account associated with an Aadhaar number. In fact it is possible to create different accounts and is link them to the same Aadhaar number at different times.

If you have the demographic and biometric details of various real persons, as you would, if you were an Aadhaar enrolment agency, it would not be impossible to create an account linked with their Aadhaar numbers without their knowledge. If you were a financial institution enrolling people it would not be impossible to open multiple accounts in different branches and link the same Aadhaar number with them at different times.

Why would one do that? Different accounts can “park” money at different times or even become conduits for laundering money. Considering that the RBI suspended the requirements of anti-money laundering rules to Aadhaar based bank accounts and enabled the opening of such accounts in the absence of a branch or an audit infrastructure makes this very plausible. Such accounts can also become conduits to claim undeserved benefits from Government that would never be traced once released. This is a recipe for embezzling government treasury with no complaints, no audit trail and no punishment.

Clearly Aadhaar number to Aadhaar number bank transfer is not identical to an account number to account number transfer. Since the NPCI maintains no log of the previous account numbers associated with an Aadhaar number it makes such transfers completely unauditable.

Let us examine the 5th assumption that transactions on ABPS cost less than other payment systems. In making such a claim the NPCI does not do an actual end-to-end cost comparison with any alternatives. The costs of ABPS that NPCI ignores are the cost of the Aadhaar infrastructure and maintenance. It ignores the costs of fraud and leakage. It ignores the cost of the infrastructure of micro ATMs and having banks switch to enabling their accounts for Aadhaar. These costs would ultimately be passed on to the customer.   

Even if Aadhaar numbers were proof of identity, which it is not, its use to make financial transfers, is the best way to make financial transfers unauditable, propagate money laundering and financial fraud. There is no rational justification for introducing an unverified and unaudited number to allow payments and settlements.

The way ahead

There is no doubt that the future may hold several disruptive business models for payments and settlements many of which may be enabled by technology. While encouraging innovation, it is the role of the regulator to ensure that these do not bring ruin to the nation’s financial system.

In an NYU paper titled ‘The Precautionary Principle: Fragility and Black Swans from Policy Actions’, Nassim Taleb argues that taking risks is necessary for the functioning and advancement of society. However, all risks are not equal. Taking into account the structure of randomness in a given system can have a dramatic effect on which kinds of actions are, or are not, justified.

With the help of probability theory, Taleb asserts that when impacts are not localized and non spreading, interdependence increases propagating impacts resulting in irreversible and widespread damage and the probability of devastation, ultimately to the point of certainty. The interdependence of the NPCI, IBA, RBI, UIDAI and the various government departments are engineered for what Taleb characterizes as “ruin”.

By enabling ABPS and Aadhaar linkages with bank accounts, the RBI has enabled fraud propagation across the entire banking industry that will result in widespread and irreversible damage. It is evident that the RBI has failed to protect the nation’s banking system from an increased probability of devastation.

In the interest of financial prudence the RBI governor, the IBA and the various banks must invoke the precautionary principle and immediately suspend all linkage of Aadhaar to any financial instrument. The RBI governor ought to declare a financial emergency and freeze all Aadhaar linked bank accounts and reverse these transactions.

The PMO must revisit the UPA projects that have been allowed to be carried forward. Given the multiple institutions involved, it would be fitting to set up an inquiry commission that will include voices that have raised caution in the interest of the nation and have a mandate to minimize the damage to the country and suggest the way ahead. In the meanwhile, it would only be prudent to suspend all linkages to the Aadhaar number.

The Supreme Court of India has several pending public interest litigations (PILs) on Aadhaar linkages and it would prudent to have a special court to issue a stay on all Aadhaar linkages till the cases are heard and at the same time hear the PILs expeditiously given the extent of financial ruin that Aadhaar can bring to India.

The banking system in India is becoming extremely complex. Complex systems increase risks disproportionately to the increase in complexity. If this investigation into a small part of the banking system - electronic money transfers - is not sufficient to make a prudent banker lose sleep, we may not have any prudent bankers left anymore. It is evident that our policy makers have neither the time nor inclination to apply themselves to the implications of their actions nor to seek counsel to protect the nation and its assets. Embroiling the unbanked into this mess is no financial inclusion - it is a debt warrant.
 

Some important Dates

Date

Particulars

Dec-08

Incorporation of National Payments Corporation of India (NPCI)

28-Jan-09

Planning Commission of India Notifies the UIDAI with mandate to create a UID.

Apr-09

Certificate of Commencement of Business issued to National Payments Corporation of India (NPCI)

14-Dec-09

NPCI takes over ATM switching service to banks in India through National Financial Switch from Institute of Development and Research in Banking Technology (IDRBT)

Apr-2010

UIDAI whitepaper: From Exclusion to Inclusion with Micropayments

13-Dec-11

The Standing Committee on Finance and urged the government to reconsider and review the UID scheme and also the proposals contained in the Bill in all its ramifications.

27-Jan-11

RBI Notification RBI/2010-11/389 DBOD.AML.No. 77 /14.01.001/2010-11 making anti-money laundering rules applicable for bank accounts opened with Aadhaar.

28-Sep-11

RBI Notification 12/207DBOD.AML RBI/2011. BC. No. 36/14.01.001/2011-12 relaxing anti-money laundering rules for bank accounts opened with Aadhaar.

Dec-2011

Dhan Aadhaar Yojana launched

17-May-12

RBI Notification RBI/2011-12/566 DBOD. No. BL. BC. 105/22.01.009/2011-12 on financial inclusion and banking correspondents.

12-Mar-13

RBI Circular RBI / 2012-13 / 436 A.P. (DIR Series) Circular No. 89 on revised guidelines for money transfer schemes.

1-Jul-13

RBI Master Circular RBI/2013-14/1 Master Circular No.1 /2013-14 on money transfer service scheme.

1-Jul-13

RBI Notification RBI/ 2013-14/31 UBD.BPD. (PCB).MC.No.16 /12.05.001/2013-14 specifying obligations of the banks under the prevention of money laundering act of 2002.

6-Feb-14

UIDAI Notification 17015/14/2012/FI enabling opening new accounts through micro ATMs

28-Aug-14

Pradhan Mantri Jan Dhan Yojana launched


(Dr Anupam Saraph is a Professor, Future Designer, former governance and IT advisor to Goa Chief Minister Manohar Parrikar and the World Economic Forum)

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COMMENTS

Damodardas Subodhdas Deshaabhimaani

5 days ago

Extremely dangerous proposition!

It is more dangerous than the demonetization!
The State in India has always been evil, because it does not belong to India or Indians!

It is A State set up by the British colonialism and imperialism and nurtured by subsequent joint neo colonialists and imperialists like Usa, France, Japan, Germany etc who inherited part of the British legacy.

This state is constantly working against the interests of the people of India.

That is why we see the disparity among people growing, compared to China, Pakistan, Bangladesh, Sri lanka etc very less proportion of the GDP and tax revenue invested in health, education, rule of law, great and increasing promotion of corruption by the state and most political parties.

Many fools helped Adolf Hitler and Nazi party of Germany to siege power and complete control of the state.

Almost all industrialists of Germany helped them.

Even American rogue capitalists working through mercenaries like Allen foster Dulles and John foster Dulles helped the fascist German state during, before and even after the Second World War.

We too have enough such fools, anti people frogs in the well intellectuals etc.

People like Nandan Nelakani who are mad believers in technology and robotic vegetative life of people are a grave danger to Indian people.

Making a company like Infosys, making profits is an altogether different ball game from protecting the privacy, freedom and independence of people from oppressive and fascist States, working primarily for crony capitalists, Mafia contractors and corrupt officials that are in millions!

People like Nandan nelakani may be personally innocent of any political evil intentions!

But their ignorance, inexperience, gullibility, illiteracy of human history of the development of State, exploitation of the state by the rogue crony capitalists and Mafia contractors and millions of government employees extorting from ordinary innocent people day in and day out, makes them most useful tools of aspiring dictators and fascists!

there is a serious danger of cyber crime spilling into real life and serious emergence of gun wielding mafia, specially in rural india. in such places police are known to be hand in glove with mafia. so many mafia dons are known to run their extortion rackets operating from the luxory of high security indian prisons!

any person can be kidnapped or otherwise coerced to act under duress to put his thumb impression and show his eyes to the iris scan under threat of death, injury, rape, defamation and a hundred other coercive things.

the government and babus advising the government have gone mad!

there is no other country in the world where a system as stupid and as bad as an adhar identity are insisted upon.

it is a direct attack on the privacy, freedom and independence of people by a dictatorship.

it is only Adolf Hitler who implemented such draconian things as these that were not implemented anywhere else in a civilezed society!

now such things are happening or about to happen in india. dangerous things and dangerous times.

we have enough rogue elements in police.
young innocent girls have been arrested by shivasena sympathetic police goons in maharashtra that was then ruled by a congress governmnet.

how abominal?!

police may themselves run these extortion rackets or become partners with mafia.

people of india must realise the dangers and act.

satyameva jayathe!

K Venugopal Menon

4 weeks ago

I'm a PSU Banker, working at Syndicate Bank, & an expert in payment systems, I worked in initial stages of ECS , NEFT & RTGS.
I am well versed with both operational side of Banking & Technical side.
Though Dr Saraph has gone to great details but falters in its foundation premise itself. He says and I quote
" An account not linked with an Aadhaar Card is not a genuine account lacks KYC(norms sic!)"
A) There are specific norms for KYC or Know Your Customer, they are I) photo ID ii) address proof !
B) Aadhaar Card has not only both of the above, but also biometric data, all thumb prints as well as iris. The permutation of all the 4 above is pretty difficult to duplicate.
C) only ONE account can be linked to Aadhaar.
D) IIN+Aadhar+Bank Account number is a unique permutation which has zero chances of error.
E) Mr A P Hota, the CEO with whom I've interacted on regular basis during implementation of EFT is a seasoned payment expert who has worked on ECS, EFT & RTGS at the RBI Mumbai.
F) What NPCI has done is , nullified the use of IFSC & Account number (better because some Banks have 14/15 digit account numbers, hence length of data 14/15 is confusing)
G) All AEBAs have I) Aadhar number ii) Mobile number.
H) it is possible that one mobile number in one IIN may have multiple accounts, but ONLY one CASA account would be associated with one Aadhaar card. So for ONE IIN, a Aadhaar Card number would have only one CASA account, and the transaction would hit accurately the correct debit as well as credit accounts (remember there are two sides of transaction , initiator (debit) receiver (credit)
I) Dr Saraph may study UPI architecture as well as #99 payment system now operational , where an account holder of one AEBA can with his basic mobile, the number of which is registered in the AEBA can send money to another AEBA using the mobile number linked to recipients AEBA.
J the premise which Dr Saraph has used of non auditability is crying wolf.
K) There's a NPC switch & the recipients & senders bank account servers as well as account numbers.
L) a CISA systems auditor CAN audit data, forensic experts can trace transactions as well as track them on real time (only authorized ones as it requires encryption keys) a Normal Auditor can verify the physical account and get confirmation, whenever required from NPCI as well as recipients or senders Bank branch.
M) This is a payment system not used anywhere in the world and is a masterstroke by NPCI to develop a payment system, avoiding VISA/Maestro/CC Avenue/Paypal.
N) I wonder if Dr Saraph is batting for Chartered Accountants losing business, or VISA/Maestro/Western Union or PayTM(or some such e-wallets where there's no bleddy KYC!!!
O) Dr Saraph is making a mountain out of Molehill & these constant opposition by people about Aadhaar and anything related to Aadhaar.
I feel Aadhaar is the best thing that happened to India which has disintermediated aam aadmi from touts dalals & commission agents allowing DBTL & such subsidies as well as pensions with ease without leakages or hassles .
The entire west based payment system would be devoid of any Indian transactions once RuPay AEBA & #99 is fully functional.
I don't see any opposition to paytm oxygen free charge cashkaro, then why object AEBA payment system?
Vested interest lobby?

Prabhakar V Hegde

2 years ago

Has this been brought to the attention of the PMO? It need to be done now. This government has an open mind, I aam sure he will do the needfull.

REPLY

Sudhir Jatar

In Reply to Prabhakar V Hegde 2 years ago

We have been informing the PM on his site Mygov. Please access the following sites to know more about fake Aadhaar cards and how these are 'officially' given:
You can go with fake documents or say you have none to your enrolment agency and just get a card made. Here is a sting that shows how this is done in Delhi (http://www.cobrapost.com/index.php/news-....
You may also like to read the following tip of the iceberg:
# http://daily.bhaskar.com/news/RAJ-JPR-sh...
# http://timesofindia.indiatimes.com/City/...
# http://uidai.gov.in/parliament-questions... also how money transfers are enabling money parking, laundering and tax evasion: moneylife.in/article/how-aa… While the RBI is raising the same concern it is suggesting a solution that will only amplify fraud See: bit.ly/1AWKDYL!

Sudhir Jatar

2 years ago

I shall ask questions, which everyone would understand:
# Why does any one at all need to substitute IFSC numbers ​issued by RBI ​with IIN numbers​ issued by NPCI​ (a private company) & account numbers with UID numbers?
# The above indicates lack of confidence in RBI; why this lack of confidence?
# What is the way ISACA would audit transactions on ABPS and what would they certify?​​

REPLY

Sandeep

In Reply to Sudhir Jatar 2 years ago

IIN is code for a Bank like SBI and IFSC is a code given to specify branch of Bank like local branch of SBI. Batch files are sent at bank level and not at single branch level. Also NPCI is under the wings of RBI only. ISaCA is international audit agency so just google it, there is tons of info about it.

Sudhir Jatar

In Reply to Sudhir Jatar 2 years ago

I viewed on Times Now that a Khalistani was in possession of TWO Aadhaar cards with two different bank accounts!!
No further comments!

M S Prabhakar

In Reply to Sudhir Jatar 2 years ago

Ha, ha, ha! I just saw the report http://www.youtube.com/watch?v=NXDDOSRMh...

Aadhaar is truly becoming the joke of our nation. I have a solution. If the government can't understand the technicalities of Aadhaar's pitfalls (neither could they understand schemes of Saradha, Sahara and Lehman Bros.) and leave it to some minions to defend, it would be wise of them to consider adding a disclaimer:

"Aadhaar Enabled Payment Systems (AEPS) are subject to biometric risks. Please read your palm (especially, fate line) or consult a palmist before enrolment."

Sandeep

In Reply to M S Prabhakar 2 years ago

You should appreciate the point that with Aadhaar in place, future of this guy is sealed for life and you can track this person's criminal history by CCTNS once those two Aadhaar card are verified in the system. That's where UID is different from paper IDs. He also had two passports which cannot be verified anywhere.

Bal krishna Gupta

In Reply to Sudhir Jatar 2 years ago

How do you know that they were genuine Aadhar Cards? Did you verify them with his biometric indicators?
No further comments.(for those who believe Cursory seeing is believing!)

Sudhir Jatar

In Reply to Bal krishna Gupta 2 years ago

That is precisely the point. I am happy that you have grasped the essence.

sohan modak

2 years ago

I don't think any one is against a national Id card. The problem is that Aadhar is based on bad software, enrollment methodologies, execution and lack of audit. As simple as that. Nonauditability = fraud potential. PERIOD.

REPLY

Bal krishna Gupta

In Reply to sohan modak 2 years ago

Are Voter cards, Bank accounts, passports audited?
If so the CAs will become over busy and over rich!

Sandeep

In Reply to sohan modak 2 years ago

Constructive criticism is always good for any system/society. So any changes that you would like to propose for Aadhaar software, enrollment methodologies, execution and audit that can make it better?

Bal krishna Gupta

In Reply to Sandeep 2 years ago

Their role is only to criticise a system which will reduce misdirected subsidies by at least 80%.

Sudhir Jatar

2 years ago

Mr. Sandeep, Mr. Ananthram and Bal Krishna Gupta perhaps you need to make a disclosure of your affiliations as you are trolling the website and making baseless statements in defence of Aadhaar that is not even the subject of the article. You have even got personal, which shows that you do not have adequate reasoning to put across.
It is strange that you are willing to ignore the ruin of a banking system if the assumptions behind the Aaadhaar Based Payment System are as highlighted by the author.
You are advised to reread the article particularly the 5 specific assumptions in justifying Aadhaar Based Payment Systems reproduced here in case you have an open mind:

"The risks of Aadhar-enbaled Payment System (AEPS)
The AEPS is based on the following premises.
1. An existing account number and IFSC code that uniquely identifies a branch of any bank are not sufficient to do a legitimate transaction.
2. An account not linked with an Aadhaar number lacks the KYC or may be a fake account.
3. An account linked with an Aadhaar number is genuine and cannot be a fake one.
4. Auditability of Aadhaar number to Aadhaar number bank transfer is identical to an account number to account number transfer.
5. The costs of ABPS are less than the costs of NEFT or RTGS.

The RBI should close down the time-tested RTGS and NEFT if assumption 1 is true. It is completely unclear why a third party number should be associated with a genuine account for identifying the account or the branch.

If assumption 2 holds and accounts not linked with Aadhaar are fake ones, or lack KYC, the RBI should be closed down for having enabled such accounts and money transfers within and between them in India. It is surprising that the Government of India does not trust these accounts when it comes to transferring any benefits when its Income Tax department has used them all along to assess income and even make refund payments. In fact, these systems are put in place so that there is transparency and to curb corruption in IT Department.

Let us examine assumption 3. When the Aadhaar number is merely a 12-digit number assigned to demographic and biometric data submitted by private parties; it cannot be a proof of identity, address or even existence. There has been no verification or audit of the Aadhaar database and therefore it is very conceivable that, as was the case of Satyam, huge number of non-existent persons is assigned an Aadhaar number. There is no basis to regard any bank accounts linked to an Aadhaar number as belonging to genuine or even existing individuals. By proper audit, we mean audit carried out in terms of the guidelines issues by the various regulatory or other authorities e.g. Association of CAs for financial audits.

Let us examine assumption 4. It is impossible to change the beneficiary in an account number to account number transfer. It is however possible to re-associate an account associated with an Aadhaar number. In fact it is possible to create different accounts and link them to the same Aadhaar number at different times.

If you have the demographic and biometric details of various real persons, as you would, if you were an Aadhaar enrolment agency, it would not be impossible to create an account linked with their Aadhaar numbers without their knowledge. This has actually happened and widely reported in cases in Mumbai and Chennai. If you were a financial institution enrolling people it would not be impossible to open multiple accounts in different branches and link the same Aadhaar number with them at different times.

Why would one do that? Different accounts can “park” money at different times or even become conduits for laundering money. Considering that the RBI has suspended the requirements of anti-money laundering rules to Aadhaar based bank accounts and enabled the opening of such accounts in the absence of a branch or an audit infrastructure, makes this very plausible. Such accounts can also become conduits to claim undeserved benefits from Government that would never be traced once released. This is a recipe for embezzling government treasury with no complaints, no audit trail and no punishment.

Clearly Aadhaar number to Aadhaar number bank transfer is not identical to an account number to account number transfer. Since the NPCI maintains no log of the previous account numbers associated with an Aadhaar number it makes such transfers completely un-auditable.

Let us examine the 5th assumption that transactions on ABPS cost less than other payment systems. In making such a claim the NPCI does not do an actual end-to-end cost comparison with any alternatives. The costs of ABPS that NPCI ignores are the cost of the Aadhaar infrastructure and maintenance. It ignores the costs of fraud and leakage. It ignores the cost of the infrastructure of micro ATMs and having banks switch to enabling their accounts for Aadhaar. These costs would ultimately be passed on to the customer.

Even if Aadhaar numbers were proof of identity, which it is not, its use to make financial transfers, is the best way to make financial transfers unauditable, propagate money laundering and financial fraud. There is no rational justification for introducing an unverified and unaudited number to allow payments and settlements.”

It will be useful to hear if you have any arguments to justify these assumptions and the consequences of the failure of the banking system that follow rather than the hot air you have been emitting and making personal remarks, which expose your ignorance.

REPLY

Sandeep

In Reply to Sudhir Jatar 2 years ago

I am no way linked to UID in any capacity but being a technocrat with international exposure I do understand the basics of need of Uniqueness identifier(i.e.UID/NPR) for a country as populous as India where fake/ghost/duplicate and middlemen beneficiary are looting the govt. system.

Every development oriented country(USA, Canada, UK, Australia, NZ etc.) you name it have some sort of uniqueness identifier to channelize the government benefits to common citizens.

My simple question to you/author is "A single UID can point to how many people in a government database if you combine the demographics"?

Also would you/author please share the source of AEPS premises quoted above or are they just made up by author?

Anand

In Reply to Sudhir Jatar 2 years ago

Dear Mr Jatar

I think your arguments as are the arguments in this piece is making some basic logical flaws For Example:
.......................
2. An account not linked with an Aadhaar number lacks the KYC or may be a fake account.

From this you jump to

If assumption 2 holds and accounts not linked with Aadhaar are fake ones, or lack KYC, the RBI should be closed down for having enabled such accounts and money transfers within and between them in India.
...............................

Basically, you are jumping from Some = All, which is logical fallacy. Existence of Benami Accounts proves that KYC have failed.

Second, Chartered Accountants are not competent to do IT Audit, What you are suggesting and I have reasons to suspect, Chartered Accountants wants to corner a piece of cake that is not theirs. And I suspect......

Before, I am in no way whatsoever related to Aadhar Scheme but instead I know quite a few things about IT Audit.

Even if System Audit is required, it can and should be done by IT people. Chartered Accountants cant even do financial audit properly :)

Anand

In Reply to Anand 2 years ago

Before should read as Before you Ask...a little mix in para as well.

Apologies.

The main points stand though.

S Anantharam

In Reply to Sudhir Jatar 2 years ago

Yes Mr Jatar - now start insinuations of affiliations etc now that you have run out of arguments and have to resort to replicating the arguments of the author of the original article!

It appears you have not either had the time to peruse or the ability to comprehend the arguments that have been put up all this while. All contrarian arguments are therefore hot air and why not - they need to be understood first!

Firstly there are no 'Riskless' systems in existence. All that can be done is to try and reduce the risks in any system to an acceptable level. Additionally the risks have to be balanced against the returns.
In the case of Govt benefits disbursal the risks of NOT having a system (which is current state wherein leakage is costing the country billions)far outweighs the risk of having a system like Aadhar which off course can be improved upon based on actual learning on the ground.
Secondly the cost of each day of delay in implementation is also horrendous and thus the argument is for not delaying any further.

Thirdly the argument that Dr Saraph's article is more researched and well founded to the extent that Aadhar needs to be scrapped essentially derides the competency of institutions like RBI besides off course the PM and all policy making bodies. The underlying charge that all these institutions beside being incompetent are also bent upon harming the national interests is also simply ridiculous.

Bal krishna Gupta

In Reply to Sudhir Jatar 2 years ago

My credentials are in public domain. ​http://in.linkedin.com/in/baalkee
I am an IITK graduate and have served a leading PSU Bank for 36 years. I have no direct/indirect; oblique/hidden link with anybody interest in the business of Aadhar at any micro/macro level.

As there are 100s of millions of non Aadhar Bank accounts also and will remain and would be used for financial transactions of bigger magnitude, NEFT and RTGS need not be and should not be closed down.
2. The transfers thru AAdhar based accounts will be only for Subsidies or by the marginal labourers who maintain accounts at banks at their place of work as well as at native places, for frauds to take place staff at both places should also collude with them that too for petty gains as the amounts transferred would be only a few thousand rupees.

3. Even now people have facility of transferring money anywhere through mobile phones or ATM Debit cards.

4. How money laundering would increase overnight is not understood.

5. As the scheme runs the experience gained and problems faced can be tackled and due precautions can be built viz maximum annual limit per Adhar Card or Aadhar Linked bank Account.

6. Money launderers dont do chindi transactions. They follow hawala/angadiya or courier routes to do their "business"

7. Please stop beating around the bush and come to the brass tacks.

8. Nilikeni came to the board much later. What axe he was to grind in tUIDAI I dont know or answer as I dont know the gentlemamn oither than the news about him in the public domain. 9.As far as finding fault is concerned, their are shortcomings in the Voter machines too, Voter cards and rations cards are also issued in wrong names. But such cases are not the reasons that VCs or ration card system should be ignored.

Why is the "Dr", "Professor" silent and not answering the criticism?

Bal krishna Gupta

In Reply to Bal krishna Gupta 2 years ago

The naysayers wanted disclosures and after disclosures they have started new sets of comments.
Bura jo dekhan main chala....

sohan modak

2 years ago

It is amazing to see the Classical Indian trait of idol worship pop up conveniently to defend Aadhar as is done by Anantharaman. Oh, Modi, who was against Aadhar, is now convinced otherwise and how can he make a mistake ? This is the kind of argument that produces no-brainers. Of course, Geeks have a vested interest in defending Aadhar that has been a huge baked (oops, cooked) bread and butter for them. Their trishuls (computers) cannot make mistakes nor can their programming be faulty, viz based on incomplete parameters! Wake up call is again due, come what Modi and his cohorts think. Nilekani's fraud is being owned by Modi?

S Anantharam

2 years ago

Despite seeing the writing on the wall obstinate closed minds will refuse to see and agree to any contrarian view point.
THE VERY FACT THAT THE ONCE OPPOSED BJP SAW IT FIT TO ALLOW THE UIDAI PROGRAMME TO CONTINUE - NAY HASTEN IMPLEMENTATION is also seen with surprise/suspicion!
I am confident a person of Mr Modi's calibre had no vested interest in allowing the continuance of UIDAI programme and in fact must have based his decision on the overall Merits of the case. However nit picking and endless debate is a truly Indian past-time and thus arguments on how this is not a 'perfect' system will rage on ad nauseum - as if the country can afford to wait for leakages of untold billions through current system of middlemen whilst a 'Perfect' system is being evolved!!!

sohan modak

2 years ago

Sandeep, No point in talking in vacuum.Please read again Dr. Saraph's article that suscitated this discussion. It is indeed surprising that BJP that was gainst Aadhar, made an about turn once Nilkani's pcture with Modi was flashed in the media.

sohan modak

2 years ago

Sadeep, your calculations may be right but misplaced and out of context. The issue is not just to save but to undertake and conduct a judicious and failsafe operation that has everlasting impact in terms of preserving national assets and security concerns.

REPLY

Sandeep

In Reply to sohan modak 2 years ago

Would you please share any specific example of so called security concern that may impact any normal law abiding common citizen? UID is no doubt a national asset that would help eliminating fake/ghost/duplicate and middlemen beneficiary in government system.

sohan modak

2 years ago

Here, in S Anantharam and Balakrishna Gupta are two digit handlers who lost their bytes., the problem that most geeks face when they inhabit the jungle of loops like the one created by Nilekani. looks like personal data security doesn't mean a bit or byte to justifiers of Aadhaar who say, Oh, a few mistakes here and there don't matter because at least we have made a beginning. At what cost, gentleman? And who paid for these mistakes? A nd who will correct these for data on millions already in the closets of US subcontractors including NSA?

REPLY

Sandeep

In Reply to sohan modak 2 years ago

You care for millions but you're fine with loosing billions? Every year government is spending 3 lakh crore in terms of welfare subsidy and we all know there fake/ghost/duplicate and middlemen beneficiary in government systems that are looting are 10-40% of these funds in different departments. Going by most conservative estimate, if Aadhaar saves 10% of this by fake/ghost/duplicate and middlemen beneficiary. Your net savings are 30k crore that's about 5 billion every year. So far money spent on aadhaar is about 5k crore which it has already paid by LPG savings through DBT.

S Anantharam

2 years ago

This is exactly the point that is not getting accepted by the 'naysayers'. They are looking for perfection in the new system of UIDAI instead of viewing it from the point of view of 'is this a marked improvement from the existing system'.
The debate will therefore be endless as perfection only exists with God!

Bal krishna Gupta

2 years ago

Bank accounts were earlier opened only on the basis of photo and signatures of the account holder. Now Aadhar provides additional recognition points in the form of iris and 10 finger prints and a unique number which make it almost fool proof.
Those deriding it are doing disservice to the mission and the consequent benefits which can potentially be derived from the UIDAI.

REPLY

sohan modak

In Reply to Bal krishna Gupta 2 years ago

Mr. Gupta, I am sure you really meant that Aadhar identity is FOOL PROOF, which is really the problem for geeks living in the realm of FULL-PROOF foolish belief that they can do no wrong. Mr. nilakani and his bunch have simply not understood how to make Ids and are still roaming in the realm of Y2K!

Bal krishna Gupta

2 years ago

The problem can be solved by having an annual ceiling on funds deposited in Aadhar based SB accounts. Random checks of some account holders vis a vis biometrics may also be prescribed. Dont see any economic emergency arising out of use of AB SB accounts.

REPLY

Sudhir Jatar

In Reply to Bal krishna Gupta 2 years ago

Random checks mean a proper audit. The UIDAI refuses to carry out an audit.

Bal krishna Gupta

In Reply to Sudhir Jatar 2 years ago

How do you define proper audit. Can a photographed person's finger prints match with those in UIDAI database if he is a impersonator?

Anil Agashe

2 years ago

Excellent article. All glitches in money transfers can lead to frauds.
I have heard a case where where in NEFT transfer, the name of the person and the account number was not matching and still the bank transferred the money to the account number without verifying whether name and A/C no match or not! This happened twice!

REPLY

Bal krishna Gupta

In Reply to Anil Agashe 2 years ago

Are you a banker?
do you know how banks operate? all transfers are done following RBI Guidelines. Human errors are part of any transactional business. that is why there is a maker checker concept to minimise such errors.

Anil Agashe

In Reply to Bal krishna Gupta 2 years ago

I used to be a banker. And the instance I have mentioned is true.

TIHARwale

In Reply to Anil Agashe 2 years ago

Yesv this made clear by Banks. So common sense suggests put a one rupee transaction, once the benificiary confirms the receipt go ahead NEFT is a wonder free facility provided by Public sector Banks free of cost and remittance gets delivered in less than 2 hours as NEFT transactions follow hourly batches.

India-China talks: President Xi Jinping reaching India on 17th September?

It appears that the Chinese leadership is keen to resolve the border issue and also take up several issues of commercial importance

 

President Xi Jinping of China is expected to visit India sometimes next week. His exact itinerary and the entourage that is expected to accompany him have been shrouded in mystery! Full details have not been made public, and it is not known, if Foreign Minister Wang Li or his assistant Liu Jianchao will be part of the delegation.

 

However, press reports do indicate that as President Xi Jinping plans to arrive at Ahmedabad, in his first leg of the tour. He will be accorded a special welcome by Prime Minister Narendra Modi himself. After spending a few hours in this city, both are expected to return to New Delhi, on the same day, to continue their discussions.

 

It appears that the Chinese leadership is keen to resolve the border issue and also take up several issues of commercial importance. In fact, during the recent preliminary visit of Dr Nirmala Sitharaman, Commerce Minister to Beijing, her Chinese counterpart had shown keen interest in signing several memorandum of understanding (MoU). Indian exports to China were valued at $14.8 billion as against imports from that country amounted to $50.9 billion during 2013-14.

 

India needs to make up this deficit of over $36 billion by exporting products and services. This could be possible only it is able to have market access to sell Indian pharmaceutical products, meat, fishery, oil meal, IT products and services, and a host of other items. It is well known that China imports a huge quantity of meat and India would be able to serve in this area. India can export high quality meat at competitive prices.

 

China, on the other hand, while being aware of the intense competition for supplying high speed trains from Japan, also has shown its serious intention to offer these, and for which it has proven experience of building some 12,000 kms of high speed trains in the country itself. China has shown that it is a serious contender for this project, and will be in a position to offer their services in terms of technology, infrastructure work, and even in setting up proper railway academy to train personnel.

 

President Xi Jinping may also offer very competitive terms for this railway system. One of the MoUs will also cover Chinese desire to set up two industrial parks, one each in Gujarat and Maharashtra, involving a capital outlay of over $5 billion.

 

However, commercial business relations can only be strengthened if there is peace around the border. Both China and India have a few issues that need to be resolved; if truly President Xi Jinping and Prime Minister Modi want to move forward with their sole intention of establishing a new era in relations.

 

To our mind, the following are the major issues that both leaders have to seriously talk it out and resolve:

 

a) tension in the Sino-Indian border should be eliminated and PLA need to be restrained in their incursions that occur from time to time

 

b) China must formally accept the de facto situation of Arunachal is a part and parcel of India; it will refrain from issuing "stapled visas"

 

c) China must also show its sincerity in returning the illegally ceded territory by Pakistan in POK

 

d) China must now agree to support India to become a Permanent Member of UN Security Council

 

e) China must now actively support India in securing the NSG membership

 

f) China must promise that it will no longer provide any nuclear knowledge, product or services to Pakistan

 

g) China must extend reciprocal arrangement, in terms of processing time, to set up Indian offices in China to a maximum of 6 months, whereas actual experience by even international firms show that Chinese processing time takes 2/3 years for completion

 

h) Finally, China must show it truly wants to revive Panch Sheel policy in letter and spirit.

 

The axis of India, China and Russia, in political and commercial collaboration will help in the development of all the three countries and bring all round prosperity and peace in the region. It will also make it possible for all the three nations to get the benefit of the mammoth gas pipeline that has recently been signed between China and Russia.

 

If both the leaders are serious, a new era of friendship can bloom.

 

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)

User

Energy Drink Companies Under Legal Attack

What you should know about some of the industry's top brands, including Red Bull and 5-Hour Energy

 

All-nighters need fuel, and college students are increasingly turning to energy drinks to fill the tank. The antiquated coffee pot (h/t Keurig) might have helped mom and dad remain alert through a night of collegiate study but the kid today requires something more.


But do energy drinks actually offer something more, other than a concentrated dose of caffeine? And if so, is that something more worth the potential health risks reportedly tied to some of the booming industry’s top brands?


In addition to the FDA continuing to investigate energy drinks, there have been some recent actions that should give college students — and all consumers — pause before they grab a bottle off the shelf. Here are a few things to know about some of the biggest players in the energy drink business:


Red Bull: This summer, the world’s largest energy drink maker agreed to pay out $13 million in customer refunds to settle false advertising allegations in a class-action lawsuit filed earlier this year. The suit had claimed that Red Bull misleads customers into thinking they’re getting a superior source of energy beyond caffeine, and argued that the functional benefits of drinking the product are actually the same as an equal amount of other sources of caffeine, like coffee.


Red Bull denied any and all wrongdoing, saying the company stands by its marketing and labeling, and decided to settle “to avoid the cost and distraction of litigation.”


5-Hour Energy: While technically an “energy shot,” 5-Hour Energy faces similar scrutiny in regard to its marketing claims. Attorney generals in more than 30 states have been investigating, with the most recent action coming in July when Oregon, Vermont and Washington filed lawsuits against the company.


Similar to the Red Bull class-action complaint, Oregon’s lawsuit claims that 5-Hour Energy’s advertising misleads customers into believing they’re getting a unique blend of ingredients with the product when in reality it’s just a concentrated dose of caffeine that provides the energy boost.


The suit also questions 5-Hour Energy’s “no crash” labeling, which the company has changed over time.


In a company statement, 5-Hour Energy said it’s prepared to fight: “When companies are being bullied by someone in a position of power, these companies roll over, pay the ransom, and move on. We’re not doing that. The attorneys general are grasping at straws, and we will fight to defend ourselves against civil intimidation. The suits allege that the only ingredient in [5-Hour Energy] that has any effect is the caffeine. If so, are the attorneys general going to sue Starbucks for selling coffee?”


But it’s a matter of advertising, the attorneys general argue. The products aren’t marketed as strictly highly-caffeinated drinks. And a review posted this month by ConsumerLab.com found that 5-Hour Energy has additional issues with one of its ingredients. The lab found that the drink contains only about 72 percent of the amount of vitamin B-12 it claims on its label. The review notes that energy beverages tend to contain B vitamins known to help convert food to energy, but that the majority of people who drink the products aren’t deficient in B vitamins. Too much of these added vitamins, the report notes, can lead to an increased risk of toxicity.


Potential health risks


From 2004 to 2012, the FDA received more than 160 adverse event reports from energy drink consumers. More than 90 reports concerned 5-Hour Energy, which consumers complained had caused health issues, including such problems as abnormal heart rate, chest pain, dizziness, loss of consciousness, and even death, of which there were 10 reported cases. There were 40 similar complaints about Monster energy drink, including five reported deaths.


The FDA cautions that these drinks should not be viewed as an alternative to rest or sleep. “It is important for consumers to realize that, while stimulants such as caffeine may make one feel more alert and awake, judgment and reaction time can still be impaired by insufficient rest or sleep,” the agency said in a 2012 statement. “If you are thinking about taking one of these products, please consult your health care provider to ensure that you don’t have an underlying or undiagnosed medical condition that could worsen as a result of using them.”


Drinking and selling


In addition to the advertising issues and alleged health risks, some energy drinks have also been linked to questionable multi-level marketing companies that are known to target college-aged individuals, such as Vemma’s Verve and Wake Up Now’s Awaken.
For more of our coverage on the energy drink — is it energy or just caffeine– industry, click here.

Courtesy: TruthInAdvertising.org

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