Budget 2023 | Entity DigiLocker to cut costs, enable seamless finance access to underserved population: industry

Launched in 2015, DigiLocker is a secure cloud based platform for storage, sharing and verification of documents and certificates. So far, 145.95 million users have used DigiLocker and 5.62 billion documents have been stored and issued.

Union minister for electronics and IT Ashwini Vaishnaw said, “DigiLocker is a very effective tool… At least three countries are on the verge of starting implementation of DigiLocker in their countries. It is such an effective system as a part of the Digital India vision.”

Aimed at the concept of paperless governance, it reduces the administrative overhead by minimising the use of paper and curtailing the verification process. Issued documents available via DigiLocker are fetched in real-time directly from the issuing agency.
It acts as a secure document exchange platform like payment gateway between trusted issuer and trusted requester/verifier with the consent of the citizen. It also provides a verification module enabling government agencies to verify data directly from issuers after obtaining user consent.

To enable more fintech innovative services, the scope of documents available in DigiLocker for individuals will be expanded and a new Entity DigiLocker will be set up for use by micro, small and medium enterprises (MSMEs), large business and charitable trusts.

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This will be towards storing and sharing documents online securely, whenever needed, with various authorities, regulators, banks and other business entities. RS Sharma, former IT Secretary who launched DigiLocker describing it as a ‘private space on a public cloud’ said digitally signed electronic KYC and business documents holds a huge economic value.

This will bring down operational cost of lending as digitally signed identity documents like Aadhaar are irrefutable, he said.

“Any hassle-free digital invention that makes life easy for everybody saves cost. For example, electronic KYC for getting mobile connections has reduced the cost of getting SIMS. Similarly, it has reduced the cost of opening bank accounts and that is why in the GeM (Government e Marketplace) we opened millions of accounts,” said Sharma.

He added that this was made possible because of the reduction in costs of storage, transportation, paper costs and photocopying. Since the transaction costs go down, it makes small value transactions also viable, he said.

Amit Ranjan, the architect of DigiLocker told ET that it will be first introduced as a pilot and then gradually rolled out to more entities. He said there was a lot of demand for the cloud-based platform for a company-level service for a “one-stop solution for storing transaction documents and entity documents”.

“It will bring down costs, make processes paperless with less red tape,” Ranjan said, while applying for loans or a government scheme.

A simplified process for updating the identity and address of individuals maintained by various government agencies, regulators and regulated entities will be established using DigiLocker service and Aadhaar as foundational identity, Finance Minister Nirmala Sitharaman said on Wednesday while announcing the Union Budget 2023.

The KYC process will be simplified by adopting a ‘risk-based’ instead of ‘one size fits all’ approach. The financial sector regulators will also be encouraged to have a KYC system fully amenable to meet the needs of Digital India.

Akash Sinha, Co-founder & CEO, Cashfree Payments, said, a simplified KYC process, and adopting a ‘risk-based’ approach as opposed to a ‘one size fits all’ outlook will ensure accurate and sophisticated verification and in-turn regulated operations in the financial services space.

Alok Mittal, CEO, Indifi Technologies, a Gurugram-based lending player told ET given that fintechs are playing a key role in credit inclusion, expanding the scope of digilocker will enable more seamless finance to underserved populations, and help bring down the operating cost of lending.

Mittal explained that cost structure directly translates not to increased profitability but to increased coverage. Indifi, for example, has so far disbursed more than 47,000 loans and across more than 650 cities.

It said it can now use entity DigiLocker to disburse loan to a kirana store (neighbourhood mom-and-pop store), for example, if its address proof and Udyam Aadhaar (MSME certificate) is available in DigiLocker.

Aditya Kumar, cofounder and CEO, NIRO, said that the expansion of Digilocker services will be a boon for the fintech sector further facilitating seamless and low-cost access to authentic information about consumers.

This will allow fintechs to increase segment coverage, reduce turn-around-times and offer cost savings which can be passed onto consumers, Kumar said.

Ranjit Barthakur, Founding Director, The Balipara Foundation, said that India is one of the most climate-vulnerable countries in the world today.

For the past few years, changing weather patterns ranging from unusual heat to unusual rainfall patterns have made it increasingly difficult for farmers to plan their crops. As a result, crop damage has been on the rise – a pattern that is also playing out globally.

One of the key factors at play here is the lack of adequate intelligence for farmers. Hence, the push for digital public infrastructure for the agricultural sector is a highly welcome intervention.

“Better market intelligence will enable farmers to invest resources accordingly and facilitate robust and informed decision-making that is up to date,” Barthakur said.