Digitisation marked its realm with the inception of computers. While with the advent of Digital India, digitisation has spurred its spectrum in India. It has metamorphosed every possible sector and surely for a better influence. A very major impact is seen on the Indian financial sector from digital identity to authentication infrastructure, it has possibly turned every cornerstone. Dr. Ajay Bhushan Pandey, Chairman, National Financial Reporting Authority in an exclusive interview with Dr. Ravi Gupta, Editor- in-Chief, The Banking & Finance Post Magazine, and Founder, Publisher and CEO, Elets Technomedia Pvt Ltd. delineated the digitisation journey of India’s financial sector, and how the advent of Aadhaar, digital identity infrastructure and UPI escalated a new chapter of success.
Q. How do you see the overall journey of the digitisation of the financial sector in the country?
Ans: I came into this financial sector in around 2001, and from there I have seen all the initial signs of the digital revolution happening across the globe. It was also at some extent happening in India. The entire digital exercise during the early few years of this century was largely confined to use of information technology for the whole internal process.
With the advent of Aadhaar in our country, you could see the pre-Aadhaar scenario where digitisation was happening but the large population was excluded digitally, financially as well as physically due to remote working. Aadhaar did not only give digital identity to the people of India but also to authenticate themselves anytime and from anywhere. The other identity systems give only the identity to the people, but Aadhaar created an ecosystem of authenticity for the people of India.
The other two aspects- digital identity infrastructure and authentication infrastructure, opened the immense possibility for the next few years, and it was used for direct benefit transfer. The digital identity empowered the people to link themselves to other things that were linked to the larger financial, social or digital inclusion. The people could go and avail the government facilities like PDS Raashan, etc. by presenting their digital identity.
The National Payments Corporation of India came up with a great step, The Aadhaar Payment Bridge which ensures that one bank account will be linked to one Aadhaar number and therefore the money will go only to the Aadhaar number which is linked, and the Aadhaar number is cross-checked with the bank before transferring the money.
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The third major development that took place in this tag is the UPI (Unified Payment Interface), and it helped people to transfer money to one another. UPI is built over the infrastructure of the bank account and the mobile number. According to the data, in the last 2 months, transactions of Rs 10L crore took place, and the number of transactions is exceeding 5L crores. Therefore, the best part of the UPI is that there is no Merchant Discount Rate imposed on the UPI transactions.
UPI is helping the other systems as well, as Aadhaar number is linked with PAN, and the entire Income Tax and Direct Tax systems are linked with the PAN number. If the infrastructure is weak and gets infected by the fraudulent number, then the tax system could not be sound.
The Income Tax Act was amended when the Aadhaar was linked to PAN number, and also it was said that for an individual to get a PAN card, Aadhaar number will be compulsory.
In case of GST registration, we have a huge problem of the fake entities, as the people open a GST company, register invoices worth crores of rupees and then disappear with the input tax credit. The GST system is completely digital, as one nation one tax is completely an innovative system of taxation. All the returns are completely digital. The GST tax system is also practiced in other countries, but the way GST is implemented in India it is completely on the digital platform and the invoice is generated on the system automatically through an online system.
Earlier there was a problem where the seller gives the invoice to the buyer and the buyer doesn’t report, then there will be a mismatch in the entries, which could lead to tax evasion. But today this rule has been ruled out again through the digital method, as the reconciliation is going online. Thus, such a system is not available anywhere in the world.
Every day people are coming up with more uses for digital transformation, and it’s like layers after layers are getting built. Earlier, there was only Aadhaar, then came the mobile number, and many e-commerce sites/ applications. Thus, the links are getting wider day by day.
“Aadhaar did not only give digital identity to the people of India but also to authenticate
themselves anytime and from anywhere.”
Q. How are you seeing the payment ecosystem as the government is taking B2B and B2C payments across nations, so how is that ecosystem getting impacted?
Ans: In this particular aspect, it is possible that in many areas in the government, the officials will ask you to fill in the challan and then you have to go to the bank and make the payment, as QR-based payment is not accepted. So, there is a lot of opportunity and potential in this segment, as it is yet untouched and the government is not yet using UPI for the payments.
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Whenever the government accepts a payment, it needs to know in what head and for what purpose you are getting the payment which is the basic purpose of the challan.
Today, many banks allow you to pay income tax online via their website.
Q. Are the various financial departments of the government part of a similar IT network, or are they operating separately?
Ans: During the last 2-3 years there has been a lot of data interchange happening, as each department works under the law and there is the concept of confidentiality. Data confidentiality helps you when you have given some information to the income tax department, and the department has to keep it confidential. During the data exchange, confidentiality and privacy expectation is maintained.
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