Explaining AAP online donation system..

We, as responsible global Indian citizens, need to understand how money travels in case of online payments. Aam Aadmi Party is the first political party in the world which have thought and designed an online donation module which is transparent and secure and regulated. We need to encourage such systems of funding elections to better our democracy, to reduce corruption.

To understand the supposed scam by AAP as alleged by the BJP, you have to read the following few paragraphs.

It is one of the top priorities of the Reserve Bank of India (RBI) to regulate various modes of online payments; be it airtel money, paypal, mobile wallets and other online payment tools. That is the sole reason why Paypal was not allowed to do business in India for quite some time, as it had a risk of money laundering.

Let us understand how AAP gets funded through their online donation module.

1. People with credit cards, debit cards, INR saving accounts, INR current accounts, mobile wallets like Airtel Money only can donate to AAP. This practically negates the misconception that foreign funds are coming to AAP.
2. AAP has payment gateways that can only accepts payment instruments like the above mentioned list which are Indian Rupee based. AAP payment gateway cannot accept an American or European or a Saudi Arabian credit or debit card.
3. So, we should understand that AAP can receive money from Indian Bank Accounts only. Now India has one of the best KYC (know your customer) policies in the world. It is so foolproof that it even acts as a barrier to opening accounts in rural India because identity and address documents are sparsely kept in rural India. So when a customer or a company opens an account, both these identity and address documents have to be provided. It is the onus of the banks to check the veracity of these documents so that a criminal or a scam company does not get to enjoy banking facilities.
4. When a donor is making an online donation, there are three or more banks involved in the transaction. Let us take a case of 3 banks. The bank of the donor, the bank of the payment gateway like billdesk, CCAvenue etc and the bank of the receiver (AAP in this case). Money flows from the donor bank to the AAP bank account via the bank of the payment gateway. We need to note that the interbank money flow is via secure RBI RTGS servers. RBI RTGS servers can only be used by Indian Banks dealing in Indian Rupees.
5. RBI has fixed a maximum time limit of T+2 days for the settlement process of these online transactions. Two donations given in two consecutive days may come to the bank account of AAP in one single day. That is not a discrepancy. It is simply the settlement processes that banks have.
6. Important to note that when AAP receives money through the online module, it does not get to know any detail about the donor. At most, it may get the account number and the bank name in case of net-banking transactions. As for credit and debit card payments, AAP does not even get to know the card numbers. There are strict privacy laws against disclosure of such information to third parties. So, effectively, AAP has to depend on whatever the donor declares in the donation form just before going to the payment gateway webpage for payment. The donor provides his or her name, his or her mobile phone number, his or her email ID, and his or her state/city of domicile. The donor may give his name as 'BARACK OBAMA' and AAP has to accept it as such. There is no verification possible. As long as the money is coming from a legitimate bank account via a legitimate channel, AAP has absolutely nothing to worry or hide. 
7. AAP cannot ask for account numbers, card numbers and such details as that would violate privacy laws. These details are only filled in the webpage of the payment gateway service providers, which are registered with the Reserve Bank of India after due diligence and regular audit processes.
8. So AAP has minimum available data to do any cross verification of the donors. The primary responsibility of verifying the donors lies with the banks, as they are the customers of the banking system with strict KYC laws.

As for cheques, banks offer a cheque collection service for account holders with sizable number of incoming cheques. As part of their service, the bank provides an MIS (mostly excel) with all cleared cheque payments which can be uploaded into the AAP website by giving them transaction IDs.

I have tried to explain the AAP online payment of donation system to the best of my abilities. If there are any questions, please ask and I will answer each one of them.

Thank you.

Please vote for AAP.

Corruption - Cure is in the regulation of money !

Is it possible that there will be a day when corruption will be a non-issue?

In lot of our discussions during our Old Monk sessions or otherwise, we indulge in a numerous points of arguments and reasons why corruption happens in India. It is an established argument that it is intrinsic to human behaviors and instincts. The primary opinion that arises is that corruption is omni-present and that we are a helpless party to it.

In a country like ours, the extent and effect of corruption is worse. India is been a poor country for a long period of time without enough end-resources to distribute among its very large base of citizens. British imperialism, fragmented strata-ised society, in-ept sub-optimal policies after independence leading to unequal development and distribution of economic wealth and resources, discrimination in providing education etc has made India a hot bed for the corrupt minds to wander and fulfill its desires.

It has made it very easy for a small section of the population to take undue advantages from the Indian system of administration and political governance. In effect, it has left a huge section of the population disgruntled, unable to lead a decent respected, sufficiently privileged life. Whenever the latter is getting a chance to move into the former, they are getting corrupt for its benefits with a revenge.

Adding to that is the Indian mind-set of thinking of only about his or her own self (and immediate family) with the focus on the result or the end, rather than the means. It doesn't matter to a Brahmin that he is taking a dip in one of the dirtiest river of the world - Ganga. What matters is his belief that taking a dip absolves him of all his sins.

It doesn't matter how we secure a salaried Government job, but having a job matters. If we pay through our noses to get a particular job, it is imperative that we will cut our noses and try to regain the lost wealth and more through corrupt practices.

Morality and the notion that all human beings are good is not going to solve corruption. To err is human too, and greed is one of the seven vices of human beings. Only regulation, policing and tighter controls can reduce corruption. Regulation, policing and controls can be structured in numerous different departments, offices and systems. It is too broad to even discuss.

Lets just take regulation of money and analyze how money itself can be a solution to our greed for more money. Money in India is primarily controlled by the monetary policy of the Central Bank of India - the Reserve Bank of India through its various policies and circulars that all banks have to follow in terms of dealing in money. One of the reasons I see hope in this argument is my experience of working in for two of the biggest banks. RBI has been a robust intelligent institution with an independent mind of its own, devoid of corrupt intent to a large extent.

Argument One:
All Government aid to a citizen should be in monetary terms deposited in a bank account or a post office account of the citizen.

Over the past 60 years, the Government has instituted numerous policies and schemes for public welfare and otherwise, to help different sections of its population in various ways. Mid-day meals, Cereal Distribution through PDS and almost all such schemes are not monetary in nature. The benefit goes to certain people who then must be honest to distribute it to the masses.

If all or most of the Government aid is distributed as money to the bank accounts of its citizen, I see two important benefits. One, all monetary aid will cut the dishonest middle man. Two, money is the fuel of the economy that can start or speed up the progress and development of a society. We can refer to Keynesian Economics to understand what I am trying to refer here.

In 2000, Indian Government has spent Rs. 361 Billion on social services which include education, health, family welfare, women and child development etc. It was 11% of the total Government expenditures. Imagine the amount and level of corruption that can happen in the distribution of this amount in kind through various services.

My argument is that we should set aside the capital expenditures required to build infrastructure, and distribute the rest in terms of money transfers directly to the bank accounts of the citizens.

Argument Two:
The documentation requirements (KYC) to open an account should be relaxed so that opening an account can be pushed strategically by the Banks going to the customers.

Banking penetration in India is awe-fully inadequate on all fronts. States like Manipur, Nagaland, Bihar, Assam, Chattisgarh and Uttar Pradesh have the lowest branch penetration, upwards of 26000 people per branch. Thankfully, financial inclusion is a stated objective of the Reserve Bank of India policy. The main intent is to reduce the average population per branch. The Rangarajan Committee has defined financial inclusion as “the process of ensuring access to financial services and timely adequate credit where needed by vulnerable groups such as weaker sections and low-income groups at an affordable cost”

RBI is adopting diverse modes including banking correspondents and encouraging mobile based transactions. Budget 2010-11 has, in fact, set a target of providing banking facilities to all habitations with a population over 2,000 within two years, using such modes.

My argument is that financial inclusion is a possibility when the bank account opening guidelines are made easier for all citizens. The KYC norms require a long form to be filled, identity and address verification documents and most crazily, a bank official has to meet the citizen to open his bank account. Isn't that a tough ask?

Why should account opening be such a tough task that illiterate, semi-literate and even the literate run away from opening a bank account? The reason is primarily to discourage money laundering, which is converting black money into white money for legal and illegal activities. I think this is an exaggerated fear of possibilities arrived through human logic and excessive deductions. Money laundering and such practices are done by the rich. The pertinent questions are what is percentage of rich people that we have in India, and how many of them would do money laundering or such financial crimes?

My argument is that the risk or harm is fraudulent account opening is lesser than the harm being caused by mis-apportioning of Government funds in billions in the context of the overall good of the country and its citizens. So we should make opening of accounts easy and remotely possible in mass.

Argument Three:
All cash transactions should be discouraged. Instead, electronic transfers, card based transfers, voucher based transfers, prepaid instruments etc should be incentivized.

Once we have a fix on the financial inclusion agenda in a few year, this will be easier to implement. Although, this needs infrastructure, RBI has instituted robust systems and protocols such as NEFT, RTGS, IMPS, RUPAY etc that will make cash less transfers a reality in the short future.

The argument that uneducated people can't use newer modes of payments is completely baseless. The older generation may be a bit uncomfortable with learning these new ways, but the youth of the country will pick it up and make it common-place. Who would have thought that Facebook in rural India is mostly accessed through Internet enabled mobile phones. Once the facility is available, robust, useful and is communicated well among the citizens, there is no reason that the facility won't be used.

The trading fraternity sees a lot of benefits in the cash economy. The primary benefit is tax evasion to the extent possible. What they don't realize is the indirect negative impact of tax evasion for the physical and mental health. If a business is profitable, cash transactions can never be beneficial in the long run. All big businesses therefore prefer banking transactions to cash un-accounted transactions.

My argument is that cash transactions is tightly linked to corruption and all efforts should be made to discourage cash transactions and reduce corruption.