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April 2012

Transforming transfers

By Tarunkumar Singhal, Raman Jokhakar, Chartered Accountants
Reading Time 1 mins
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The report suggests that a vast network of micro- ATMs, or automated teller machines, be set up across the country using the business correspondent model. The million-strong army of business correspondents will have to be subsidised by the government in order to make the transactions profitable and extend the network sufficiently. Once in place, however, the presence of network externalities should incentivise and enable the use of bank accounts and post office accounts by many more recipients of government money — whether it be kerosene users or beneficiaries of the National Rural Employment Guarantee Scheme (NREGS). More than that, all payments or receipts of the government of sums greater than Rs.1,000 should be made electronically, which will greatly increase transparency and accountability. Micro-ATMs are already being piloted in Jharkhand by the UIDAI for NREGS payments; their effectiveness will need further independent evaluation, as Mr Mukherjee emphasised, but the principle appears sound.

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