Aadhaar card is one of the largest biometrics programme in the world. Along with acting as an identity card, Aadhaar is being used in many other fields to get work done. Want a new SIM card? Aadhaar will help you with it using eKYC. Want to withdraw or deposit money electronically? Aadhaar Enabled Payments System (AEPS) is there at your service.
One of the most important features of Aadhaar, specially for the majority of the rural population which was facing extreme delays in getting their daily wages or subsidies, is the Direct Benefits Transfer scheme. Using this, the government can directly transfer benefits to the beneficiary’s bank account.
India’s corporate entities have also started implementing Aadhaar into their HR workflow. Mahindra & Mahindra, for instance, is the latest Indian multi-national company which has implemented Aadhaar enabled salary payments. It has partnered with IDFC bank to utilise the Aadhaar Payment Bridge System (APBS) for payroll processing.
“Very few corporates are using it at the moment, but the potential to use it is phenomenal. Two years back, it was mandated that all government employee salaries and their employee records will be linked to Aadhaar. That has happened to at least the central government employees, if not all the state government ones,” said Rajesh Bansal, senior advisor at BFA and former assistant director general at UIDAI.
The most important benefit for corporates and government entities using Aadhaar for salary disbursement is the fact that it does not matter if your salary account is not with the same bank as your employers. Also, employees can switch bank accounts anytime they like without getting the employer or government involved. This ensures more power to the employee with regards to their bank accounts.
The basic mechanism for APBS is the same whether it’s a government organisation or a private organisation. It involves sending payments to an Aadhaar number which is linked to a bank.
Of the total population of 125 cr Indians, around 111 cr of them have an Aadhaar number and their enrolments are done. Around 904 banks are connected with Aadhaar Payment Bridge System today.
“Around 40 cr people already have an Aadhaar-linked bank account. Most of these banks are on the core banking system. As far as Co-operative banks go, NABARD has ensured that most of these co-operative banks are live on core banking as well. So, that is not that big a constraint,” says Bansal.
Corporates currently use enterprise management tools such as SAP to disburse salaries from the HR module.
“APBS is a payment mechanism, which is similar to NEFT, you can say. In NEFT you need to collect the bank account number, bank code whereas with APBS you can send money to an Aadhaar number. Of course this Aadhaar number has to be mapped to an actual bank account. ERP, on the other hand, has to generate a payment file. That payment file, has to be given to the employer’s bank and also every employee has to maintain an account with this bank. So that is a challenge, and if you switch companies, you may at times also have to switch your salary accounts. That hassle of changing bank accounts should not be mandatory. With Aadhaar linked bank accounts, it does not matter who your banker is. Your salary will get credited based on your Aadhaar number,” said Bansal.
Aadhaar linked bank accounts are used extensively for Direct Benefit Transfer schemes, which has helped the govt save over Rs 36,000 cr in the last two years, when it comes to public distribution of subsidies for LPG as well as MNREGA worker daily wages payout.
According to Bansal, the biggest advantage with Aadhaar is that this number is good for life. You can send money to a person for life on the same Aadhaar number, irrespective of which bank it is linked to in the backend.
“For an MNREGA worker, if the person changes the account number constantly, then not only is inconvenience for the worker to inform the authorities of the account change, but it is also an administrative overhead for the govt to ensure that changes are updated on time. Whereas with the Aadhaar number, that work is bypassed,” said Bansal
There have been concerns regarding Aadhaar linked accounts, as it uses fingerprints as a means to validate identity.
“We have various levels of firewalls, end to end encryption mechanisms to ensure that only authorised entities have access to Aadhaar database. Also, fingerprints are never stored on the servers, only the templates are stored. Till now, there hasn’t been a single case of any compromise on our data,” said Bansal adding that while security was a fair concern, UIDAI had all its tracks covered.
Apart from the formal sector, Aadhaar linked payments could also help in the informal sector which sees a lot of contract-employees. It helps to whet contract-based employees who may have committed some fraud in past and are planning to rejoin the organisation. “It minimises HR risk for identifying doubtful employees. One of the corporates has come on record and said that sometimes it is difficult to keep track of all the contract employees who are rejoining the same organisation, under aliases. So it is difficult to identify who may have committed fraud in the past,” said Bansal.
So there clearly seems to be an incentive for corporates to also move on to the APBS system. While this could affect the employer’s bank (in terms of guaranteed account holders it can get from a private company), it certainly makes life easier for the employee.