Building a foundation

With the passage of Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Bill, there is statutory backing for transferring government subsidies and benefits to targeted people. Although the Direct Benefit Transfer (DBT) has been implemented in phases, the move is a good news for consumers of financial services as well. Right now Sebi has allowed the use of Aadhaar as a valid KYC to invest in mutual funds. It has done so with a cap—investors can invest up to Rs. 50,000 per financial year per mutual fund using one time password (OTP) through eKYC. However, this is more of a stop-gap arrangement than a solution which will spread financial inclusion, especially when it comes to bringing in more investors into the markets.

Aadhaar

• 99,26,41,185 people have it
• Your Aadhaar number can be authenticated, provided you have given the consent
• The data in your Aadhaar will not be shared with anyone
• You can change your address on Aadhaar after its been issued

To help investors use technology to invest in a convenient manner, Sebi plans to come out with e-commerce distribution guidelines on the back of the passage of the bill. This way, with Aadhaar and a technology platform guidelines, products pricing will emerge, which should help investors with options when it comes to investing. With plans to further ease the eKYC process, the government is working towards making investing through the digital platform a seamless and easy process.

Considering the fact that the cost of going through eKYC is going down, it is likely to be very low with the passage of the Aadhaar Bill. And by providing options to invest through digital channels and at a lower cost, one can expect investing to take off among people who are otherwise restricted in doing so because of lack of eKYC. As an investor you need to watch out for platforms that will proliferate in offering financial products at lower costs, because it is not just costs that you need to consider, you need to also make sure that the product is for you and comes with stated service standards.

olmdesk@outlookindia.com