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Smart Card Project
Commissionerate, Rural development
India

The Problem

The smart card Project was initiated because the Rural Development Department implements several development programmes where the key requirements include:
o Proper targeting of beneficiaries
o Proper identification of beneficiaries
o Ensuring prompt and accurate payments to the correct beneficiaries, and
o The need for transparent and trackable record keeping for validation and Accountability.
The above requirements pose specific problems and concerns to the Implementing Agencies in ensuring that entitlements and benefit payments by the Government reach the correct person within specified time-frames and as per specified entitlements. At present, to take the example of the Schemes NREGS and SSP, there are significant concerns of :–
o Payments being delayed because of the inability of paying agencies to handle the current levels of payment. In the case of NREGS, payments are being made through Post offices and the Post office infrastructure is unable to cope with the demand in places where the demand is high. Therefore, there is a need to establish alternate and viable institutions to provide payment channels to the beneficiaries at the village level.
o There is no proof that the payments are actually being made to the correct incumbent in the case of either SSP or NREGS. This provides opportunity for leakages and fraud.
o It is difficult to detect fraud or payments to wrong claimants through the existing records.
o Absence of systems to analyze the actual date of credit by Government Agencies and the actual date of receipt in the hands of beneficiaries.
Considering that the total number of beneficiaries and related payments required to be disbursed by the Rural Development Department alone, the need for significant improvements in payment and monitoring services is evident.
Like in any social security or wage employment programmes run by Governments across the world, wrong targeting, siphoning of funds by middlemen, impersonation and fraud are the ills plaguing the SSP( Social Security Pensions) and NREGS (National Rural Employment Scheme) programmes. As only a miniscule part of the funds meant for the poor reach them, it is imperative that systems are evolved to plug the leakages and ensure that funds reach those for whom it is meant for.

Solution and Key Benefits

 What is the initiative about? (the solution)
So the Smart Card Project while enabling Financial Inclusion is also designed to bring about efficiency in the present payment processes. Collaborative partnership is established between the Government and banks/ financial institution. The Government of Andhra Pradesh has partnered with 7 banks. M/S Little world, M/s FINO and Integra are the service providers. Chip based smart card with biometric (finger print based) and photograph as proof of identity is used for disbursement. Social Security Pensions are disbursed every month and wages are disbursed to NREGS labour every week through Smart Cards. The business correspondent disburses the pensions and wages at the village level within 4 days of release of amount by DRDA (District Rural Development Agency)/MPDO (Mandal Parishad Development Officer) to the participating bank.
For implementing the Project, widespread awareness campaign and trainings are conducted. In all the villages, literate women, identified by the local Village Organisation (VO) are trained by the concerned bank/business correspondent and positioned in the village as the customer service provider to make payments. Banks have taken the responsibility of enrolment of beneficiaries , issue of cards, positioning the hardware , delivery of cash and MIS. Department of Rural Development facilitates all the stages of implementation through the district administration, mainly the District Rural Development Agency & District Water Management Agency that anchor SSP and NREGS respectively.
The use of biometrics has ensured benefits reaching the real beneficiaries and elimination of bogus beneficiaries
Recording of each transaction is making monitoring effective.
Tracking unspent amounts and getting it back also became possible.
Having a bank account is encouraging the savings habit among the poor. It is also having a potential to bring a plethora of banking and financial services to the doorstep of the poor.

Actors and Stakeholders

 Who proposed the solution, who implemented it and who were the stakeholders?
A special team was organized in the Commissionerate, Rural Development to design the solution and the banks with the help of service providers like Little world and FINO conceptualized the project. NISG, Hyderabad gave the recommendations for adapting common standards. After series of meetings with all stakeholders including the political and civil societies the solution was firmed up. It helped in bringing quality to the project. The technology from the service providers , the domain knowledge from Government, encouragement and acceptance from pensioners and wage seekers have helped in integrating diversity of interests and reaching all stakeholders. The contribution to design and implementation of the project has come from civil servants, organizations and private sector not to forget the wage seeker whose feedback has helped tremendously in fine tuning the initiative.
The name, designation, organization, Roles & Responsibilities of each functionary is given below
KEY OFFICIALS
1 Mr K Raju, IAS -Principal Secretary, - Secretariat, Dept of RD - Inspiration, Support and guidance at all stages
2 Ms A.Santhi Kumari, IAS - Commissioner -Commissionerate, RD - Overall monitoring
3.Ms Anitha Ramchandran, - Director, SHGs- Commissionerate - Conveying policy decisions and overall incharge of implementation
3.Dr M Padma, - Director SOMC & Jt Commissioner (M&E, IT).- Commissionerate –i/c of implementing smart cards in NREGS and technical support for implementing payments through smart cards.
4. Mr A. Rajendra Prasad, Retd. Banker, Project Consultant.
5. Mr. Ganti Srinivas, Addl. C.E.O.
6. Mr. M.S.N.Kumar, Dy.C.E.O.
7. Ms. A. Madhavi Rani, Asst Project officer,
8. Mr. M. Rajesh Babu, computer asst,

(a) Strategies

 Describe how and when the initiative was implemented by answering these questions
 a.      What were the strategies used to implement the initiative? In no more than 500 words, provide a summary of the main objectives and strategies of the initiative, how they were established and by whom.
The main outcome of the Project is the ability to disburse pensions and wages through the cards in a secured, timely manner. The wage seekers are not losing a day’s wage since they can take the money in their village itself.
The key processes of the Project are
Enrolment: The department provides the list of identified beneficiaries under Social Security Pensions and NREGS. The concerned banks conduct enrolment camps at village level. Gram Panchayats (GPs), VOs (Village Organisatins) assist the enrolment teams for identification and enrolment of beneficiaries. 6/ 10 finger prints, photo and demographic details of the beneficiary are captured. The banks open Savings Banks (SB) Account (Zero Balance) in respect of the beneficiaries. Every beneficiary is issued a Smart card to establish proof of identity.
Preparation and issue of smart card: Data collected during enrolment is encrypted on the card including biometric information, account number, his card ID number, demographic information and photo of the individual. The cards are printed and delivered to the beneficiaries in the village within 3 weeks. Once issued, the cards are activated at the banks server to enable the beneficiary to perform transactions.
Appointing Business Correspondent (BC) & Customer Service Provider (CSP): Banks appoint a business correspondent to deliver service at Gram Panchayat level through CSP. Required hardware like finger print reader, printer, mobile phone etc., are positioned in the village. Generally CSPs are ladies appointed by VO. The BC/CSP is also given a card with his/her biometric information encrypted in it. The terminals are activated only if it is authenticated with the card of the BC/CSP.
Payment: Government issues instructions to the banks authorizing payment. A cheque/ advice along with the payment proceedings is sent to the banks by the Project Director (PD), DRDA in case of pensions once in a month. In the case of NREGS, the MPDO issues pay order along with cheque to the bank once in a week. Once this is received by the bank, it physically transports and delivers the cash in the village to BC/CSP. The BC/CSP, in turn pay the beneficiaries.
Disbursement: BC /CSP make payment at a pre-designated government premises usually GP building etc. Beneficiary approaches with card. Card is inserted in the card reader and identity of beneficiary is established by biometric authentication. Based on the a/c balance of the beneficiary as displayed on the screen, cash is paid. A receipt is generated in duplicate, one of which is given to the beneficiary and the other copy is kept with the Data Uploading for MIS: The CSP/BC can perform transactions both in online and offline mode. CSP/BC uploads offline data of the disbursement made once in a day. Based on the technical and manual disbursement data that is uploaded various MIS reports are generated and sent to the various stake holders

(b) Implementation

 b.      What were the key development and implementation steps and the chronology? No more than 500 words
In the pilot, pensions and wages disbursed through smart cards in all six mandals of Warangal and two mandals of Karimnagar. On successful completion of the pilot, phase wise upscaling in the entire state is planned. Out of 22 Districts, the initiative has been upscaled to 6 districts with service area approach in Phase I, and Phase II will be started in another 8 districts with one bank – one District model. As on January 2009 mid week 37 crores are paid through the smart cards

(c) Overcoming Obstacles

 c.      What were the main obstacles encountered? How were they overcome? No more than 500 words
The main obstacle was to sustain the banks' interest in the scheme since it has to be commercially viable to them. After series of meetings with banks independently and under the aeigis of Reserve Bank of India the banks started showig interest and the project moved forward.
Once the project started having a common technology platform between the 2 technology partners was the issue. NISG studied and suggested the common standards to be followed.
Once the project rolled out availability of more machines for enrollment was a problem and scaling up slowed down. Then the technology providers introduced high end machines that quickened enrollment process.
Finally where there is a willl, there is a way and this Department being committed to the welfare of the poor is continuing with this initiative.

(d) Use of Resources

 d.      What resources were used for the initiative and what were its key benefits? In no more than 500 words, specify what were the financial, technical and human resources’ costs associated with this initiative. Describe how resources were mobilized
In the pilot phase cost of cards and part cost of the hardware was borne by the State Government besides paying 2% service charges to banks. In the upscale mode
• All capital costs (Card, terminals in village), training and remuneration to BCs are borne by banks which come forward to implement in a given district.
• Govt. pays 2% service charges to banks on the volume of total financial transactions; which will be reviewed after the first phase expansion
• Private financial companies are allowed only through banking model.

The pilot in Warangal District has been an eye opener especially in case of SSP.
In the beginning of April 07, before the introduction of Smart cards the undisbursed pensions were 112. But in July after the smart cards were introduced the undisbursed numbers soared to 1284.
From the financial angle, Rs. 22400 was undisbursed in the beginning of April 07, and Rs. 256800 was undisbursed after smart card was introduced.
Saving of Rs.11.38 lakhs per annum, has been achieved after commencement of disbursement through Smart Card which interpolated for the state would mean the Government would have a saving of Rs. 18.93 crores per annum as the system eliminates payment to a non-bonafide beneficiary. The number of pensioners not turning up for enrolment despite doing several rounds of enrolment implies that they are bogus

Sustainability and Transferability

  Is the initiative sustainable and transferable?
The concept is in consonance with Reserve Bank of India’s proposal to roll out smart card based banking services to the un-banked section of society. It is nothing but a branchless banking model. It enables establishment of last mile banking in the form of a banking outpost (business correspondent network) in every village to facilitate delivery of banking and financial services to the poorest of the poor.
The entire process as explained above is automated and the transfer of data takes place either through wired or wireless connectivity.
The project is easily replicable and several states are trying to adapt similar technology.
Further the following factors helped in sustaining the initiative -
Political conditions and leadership: The genuine commitment from political leaders, the private sector and civic organizations is garnered. Frequent stakeholders meetings and workshops have led to knowledge sharing and removal of any apprehensions that may scuttle the project.
Regulatory framework: A proper regulatory framework is put in place to enable secure information exchanges within and between government, and citizens. Organisational conditions: The evolutionary change of the institutional arrangements is handled before implementing the scheme itself.
Cultural and human resources conditions: Positive attitude is built through periodic motivation and orientation from the ministry and higher-ups.
Financial conditions: The project is funded by banks as part of total financial inclusion and the banks are paid service charges for each transaction, which are costed to the scheme itself.
Communication environment: For acceptance and understanding of all stakeholders to ensure that its benefits flow to the society as a whole, communication campaigns are run at the villages and knowledge sharing workshops arranged.
Technological Infrastructure: The required infrastructure is placed with the CSP. Their upkeep is covered under maintenance contract with the service providers and hardware vendors.
Data and information systems: Management systems, records and work processes are in place to provide the necessary data to support the smart card implementation.

Lessons Learned

 What are the impact of your initiative and the lessons learned?
The pensioners are getting money straight into their hands and now are not duped by any middlemen. The other outcomes include elimination of bogus beneficiaries, prevention of same benefits reaching twice or more times to a beneficiary, business opportunities and awakening of rural economy to technology and e governance.
It is envisaged that though the project has initially started with two schemes, viz., disbursement of Social Security Pensions and payment of wage under NREGS, the other programmes like housing loans, SHG Bank linkages and crop loans etc., will also be taken up through smart card subsequently. Thanks to inherent security capabilities, smart cards can be used to host multiple applications, enabling consolidation of services on one card, which promotes cost savings and efficiency. What is most fascinating about the smart card project is the fact that it has brought dignity and value to the lives of the most vulnerable in society.

The Smart Cards Project has a mixture of all the three - G2G, G2C and G2B.
G2C -
• Payments are delivered within 4 days of transfer of funds to banks.
• People have welcomed the model because it offers tremendous convenience to them by bringing banking services at their door steps.
• Because of the customers biometric and keys inserted on the card, it is not possible for anyone to read the customers account details without authentication. This has eliminated proxy payments. This has helped especially the old to access their money without any third person knocking it away.
• Single card for all the Government benefits is preventing the same benefits reaching the beneficiary twice. This is helping the Government to cater to large beneficiaries unlike before wherein a small group corned the benefits.

G2G -
• It helps a great deal in identifying and eliminating bogus beneficiaries in a foolproof manner.
• In spite of extensive use of technology, the user interface of gadgets as well as processes was so simple that literate women in villages are able to operate it with simple training.
• Death vacancies and permanent migration cases have come to light as banks give information about the pensions not disbursed. This has eliminated the bogus entries.

G2B –
• The banks are using this as an opportunity to extend their services up to the village level as part of total financial inclusion.
• Banks are marketing their products.
• The technology service providers are able to experiment with their solutions, fine tune and make them economical and viable for marketing their products.
• The Village organisation at the village level is eyeing the project as an alternate source of income for sustaining their community based activities

Contact Information

Institution Name:   Commissionerate, Rural development
Institution Type:   Government Agency  
Contact Person:   M Padma
Title:   Joint Commissioner  
Telephone/ Fax:   919989024425
Institution's / Project's Website:   91-040-23243518
E-mail:   commnr_rd@yahoo.co.in  
Address:   H. No. 5-10-192, 2nd & 5th Floors, Hermitage Complex, HUDA Bhavan, Hill Fort Road, Saifabad,
Postal Code:   500004
City:   Hyderabad
State/Province:  
Country:   India

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