Truly unique IDs

In 2003, the Securities and Exchange Board of India (Sebi) issued regulations which created a Market Participants and Investors (MAPIN) database.

Each entity registering with the database was issued a Unique Identification Number (UIN). Mandatory registration, the deadline for which has been extended to March 31, 2005, is required for not just market intermediaries and directors of companies but also for individuals wishing to engage in share or mutual fund transactions exceeding Rs 1 lakh.

The motivation behind this scheme cannot really be faulted. Insider trading, market rigging, and other designated evils will all be easier to monitor when the individual's UIN is attached to each transaction that he undertakes.

All large transactions can be traced back to their initiators once the system is in place.

Many objections have been raised about the logistics of the scheme""other than supplying documentary proof of identification, people registering are subject to biometric identification, a euphemism for fingerprinting a thumb and finger on each hand.

The civil liberties implications of this requirement are easily understood and have invited protest, but the process has been made relatively easy and simple by appointing a number of respectable private sector agencies across the country as points of service.

There are broader issues at stake in this process. From the perspective of individual investors, the Rs 1 lakh limit for investments in mutual funds makes very little sense.

The whole idea of mutual funds is that individuals have a low-cost means to diversify their portfolios and can leave the job of picking stocks to qualified and hopefully capable fund managers.

If at all there are shenanigans in the operation of mutual funds, it is certainly not within the power of the individual investors to perpetrate them.

It is the fund managers who are typically responsible. The objective should be to encourage as much individual investment in mutual funds as possible, rather than deter it by insisting on registration with yet another database.

From a systemic perspective, the sad reality is that this effort by Sebi to initiate yet another identification system underscores the inability of the government to utilise IT to its full potential.

It seems that every government department, which has its own ID system, simply refuses to co-ordinate with other departments. For example, most if not all regular investors have already gone through the process of getting a permanent account number (PAN) from the income tax office. One would have thought that Sebi could have simply tapped into this to get unique identification, but no. A parallel and duplicative process just had to be put in motion.

For a country that claims global leadership in IT services, this e-illiteracy of the government is shocking, not to mention costly, and inconvenient to people who have to register separately with numerous databases.

The full integration of these databases, leading to a truly unique ID for every individual in the country, is an objective that the government must set itself to at once.