The Reserve Bank of India yesterday (Jan. 08) announced the creation of a five-member committee to facilitate the “deepening of digital payments” in the country. For many, the committee’s composition reignited longstanding concerns.
Two committee members drew the bulk of the criticism. First was its chairman, Nandan Nilekani—the architect of Aadhaar, India’s controversial biometric identity database. The second was Sanjay Jain, a former chief product manager of the Unique Identification Authority of India (UIDAI), the body that administers Aadhaar.
Both Nilekani and Jain have ties to a small but powerful interest group: the Indian Software Product Industry Roundtable, or iSpirt—a lobby of volunteers, several of whom were once part of the UIDAI. iSpirt has been the primary promoter of India Stack, a clutch of software applications that underlie Aadhaar’s ecosystem. Nilekani was a mentor to iSpirt, and Jain is still a volunteer.
“You have a regulatory committee that has undue representation from one set of players,” said Srikanth Lakshmanan, founder of Cashless Consumer, an educational initiative on digital payments.
iSpirt has been controversial for years. Allegations of conflicts of interest have been rife, especially since several former UIDAI officials associated with the lobbying group have jumped to the private sector to profit from Aadhaar-related businesses. The group has also come under fire for its lobbying for data localisation.
Earlier this week, digital outlet Asia Times published a leaked recording that suggested iSpirt members had early access to information about the policies the government would enact on Aadhaar.
This, along with other controversies that have embroiled the organisation over the years, may be a sign that the committee is in less-than-neutral hands.
A judgment and a leak
In late September, India’s supreme court finally ruled on a long-pending challenge to Aadhaar, declaring that the programme was constitutional but in need of checks. One such check, a restriction on private companies asking for the identity number, upset many e-payments startups whose business models depended on Aadhaar.
In the months since then, the central government seems to be trying to counteract the judgment by introducing legal amendments that, among other things, aim to legalise private use of Aadhaar again. These amendments were passed in India’s lower parliamentary house last week.
Two days ago, Asia Times published a leaked tape of a conversation between three members of iSpirt, including Jain. In the recording, which was from an open-house discussion that iSpirt held days after the supreme court judgment, Jain refers to a blog post he’d just written arguing that the ruling had not, in fact, prohibited private use of Aadhaar. (He received immediate backlash, including from lawyers who argued that his interpretation was wrong.)
Soon after in the recording, another person—reportedly iSpirt co-founder Sharad Sharma—says the reason iSpirt is “not pushing so hard” to prove their arguments about the judgment is because “we don’t want to rub it in” against the “group of people who’ve put seven, eight years fighting Aadhaar.” But, he adds, “this is where we think everything will end up: UIDAI will issue some circular, there is an ordinance in the works, and then an amendment to the law will happen. Please don’t tweet this, but that is what the process is.”
Their words, spoken just days after the supreme court verdict, foreshadowed the actions the government took, months later.
After Asia Times published the story, some said the recording suggested that iSpirt had prior knowledge from the government.
iSpirt put out a blog post containing the emails that Saikat Datta, the Asia Times journalist, exchanged with Jain before the story was published. Jain’s final email says that instead of stating inside information, he and his associates at iSpirt were “trying to read the tea leaves so that we could inform the startup community, and also respond to the data protection bill appropriately.”
Conflicts of interest?
In September 2017, technology news website The Ken reported that Jain, along with other former UIDAI officials, had launched Khosla Labs, which profits from Aadhaar-based authentication services. This, many argued, heavily suggested conflict of interest.
In Jain’s final email to Datta, he denies there was any conflict of interest, since three years elapsed between his employment at the UIDAI and Khosla Labs, and there were no allegations of “undue favours” from the government.
But the cloud of alleged cronyism has not lifted from iSpirt, especially since other former UIDAI members have entered Aadhaar-related markets too. One founder of OnGrid, an Aadhaar-based background check company, is ex-UIDAI, as were three founding directors of venture-capital fund AngelPrime.
Other serious allegations also surfaced in the Ken article, which discusses the Unified Payments Interface (UPI)—an India Stack API through which users can transfer money between banks, and on top of which many digital payments companies have built apps. The article reports that one payments company, PhonePe, received “red carpet treatment from iSpirt” when UPI was launching, while other companies were left out in the cold.
UPI is run by the National Payments Corporation of India (NPCI), a private company owned by a consortium of Indian banks. Nilekani supposedly has immense influence over the body, despite not holding any office. The Wire reported last year that Nilekani might have forced the organisation to make his close associate Dilip Asbe its CEO over the candidate that the majority of its directors had chosen. The Caravan reported in May that, according to a source with knowledge of the Asbe affair, Nilekani “shadow runs” the NPCI.
Amol Kulkarni, a fellow at CUTS International, a Jaipur-based think-tank focused on consumer trust, says he has “concerns with respect to potential conflict of interest and past association of members of the committee with select organisations.” But even more importantly, he said, the committee has no “representation of consumers, merchants and other key stakeholder groups which are likely to be severely impacted by recommendations” or any resultant policies.
Last October, iSpirt drew sharp criticism from the US-India Strategic Partnership Forum (USISPF), which represents American companies like Visa and MasterCard, for its alleged lobbying for the RBI’s controversial data localisation policies.
USISPF reportedly said that iSpirt “hijacked” a closed-door RBI meeting to “raise technological issues which needed a more detailed meeting with the right stakeholders.” The very presence of iSpirt at such meetings, USISPF said, “may constitute a conflict of interest, especially when they were asked by the RBI during the course of the meeting to provide technical expertise to companies on compliance to this directive.”
Quartz has sent emails to Nilekani, Jain, Sharma, the UIDAI, and the RBI. This story will be updated as and when any of them replies.
Lakshmanan of Cashless Consumer argued that the strong representation of iSpirt members on the digital payments committee could pose even greater problems. “Card players have already cried foul on data localisation,” he said. “And UPI is having an interest to capture the card market. Here you have two people who have associations with UPI, sitting on a Reserve Bank committee, envisioning the future of payments.”