Infosys co-founder and chairman Nandan Nilekani on Tuesday said people are not using no-frills bank accounts because of the transaction charges levied by banks. Nilekani exuded confidence that the problem on hand is “solvable”, and added that it is essential to find a solution to it because other countries can also emulate the same.
It can be noted that an aggressive campaign by lenders saw bank accounts being opened for a majority of its citizens and has been using the same for delivery of money from the state through the direct benefit transfer scheme.
Speaking at the Global SME Finance Forum here, Nilekani, who headed the Aadhaar project, which has helped ease KYC requirements, said there is money in the bank accounts, but rued the lack of transactions because of the charges being levied.
“What happens in many places is that when you have these basic no-frills accounts, they are not seen as being economically viable to operate. A lot of charges are put on those accounts. So, people stop using those accounts,” Nilekani said.
He termed it as an “operational issue”, which is “solvable”.
Speaking about India’s targto get at least 50 countries to implement at least a part of the digital public infrastructure, Nilekani said the world has to make the best use of the knowledge and expertise gained by India, which treaded into the “unknown” to begin with.
He also suggested that India should look at major corridors like the India-UAE or India-Saudi Arabia, where there is a flow of funds for better success with the initiative.
It would also be better to have the tie-ups through multilateral arrangements, where a country can connect up faster rather than doing it on a bilateral basis, Nilekani said.
Deepening of the central bank’s digital currency will make it more convenient to undertake such payment tie-ups, he added.
The partnership between India’s UPI and Singapore’s Pay Now has helped reduce the commissions to 3 per cent from 5-6 per cent earlier, and the same can come down further to as low as 1 per cent if CBDCs are used at both ends, he said.
Nilekani said finance to small and medium enterprises is at the cusp of a transformation because of the availability of data, which makes a lender comfortable while taking a call on credit.
There are UPI payment details, GST returns and tax returns, which make it easier to take a call, he said, warning that in a digital system, a single default by a borrower can ensure that he will never be able to get credit again in his life.
Meanwhile, Minister of State for Finance Bhagwat Karad, who was also there at the three-day event, said 50 lakh street vendors have received credit without any collateral under the financial inclusion efforts of the government.
