Analysis: Financial Inclusion Implications of India’s new National ID Law

Tuesday, March 15, 2016

On Friday, the Lok Sabha stamped its overwhelming approval on the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Bill. Since it is a money bill, the Rajya Sabha cannot exercise a veto. It is for all practical purposes just short of becoming law.

In effect, 985.16 million holders of the 12-digit individual identification number issued by the Unique Identification Authority of India are on the verge of having their Aadhaar card endowed with legal backing. So far, its legitimacy had been based on a notification issued by the erstwhile Planning Commission. Critics railed against this rather casual approach, and rightly so—to a body which is the repository of key personal information of individuals and therefore risks breach of privacy—and used this to challenge the legitimacy of Aadhaar in the Supreme Court.

What the National Democratic Alliance (NDA) government did on Friday was to delink the two battles. By giving Aadhaar statutory backing they made it legal, restricting the ongoing dispute in the Supreme Court to concerns of privacy (which can also be dealt with adequately if the government brings forward legislation aimed at protecting privacy of information, conceived during the tenure of the United Progressive Alliance, or UPA, but deftly consigned to the bureaucratic maze).

This is a big deal. Effectively, it means that Aadhaar can be used in official dealings. It is a key part of the “JAM Trinity”—Jan Dhan, Aadhaar, Mobile—that will drive the government’s ambitious plan of a technology-enabled, real-time direct benefits transfer system.

Source: Livemint (link opens in a new window)

financial inclusion, regulations