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Banks, fintech firms await government word on Aadhaar

One can self-volunteer to link Aadhaar and opt for the e-KYC process, which empowers customers, but customers can now opt not to, even it may limit credit access.

Published: 28th September 2018 04:57 AM  |   Last Updated: 28th September 2018 09:29 AM   |  A+A-

Aadhaar Cards. (File Photo | PTI)

Express News Service

NEW DELHI: The Supreme Court may be done for now on Aadhaar, but questions thrown up by its verdict await clarification and interpretation from the authorities. While those fintech firms that have depended wholly on Aadhaar-based e-KYC are staring at an expensive redesign of business models, banks and financial institutions face the question of how to go about de-linking Aadhaar when customers demand it. 

Wednesday’s SC judgement compels firms to re-evaluate consumer onboarding processes through e-KYC. One can self-volunteer to link Aadhaar and opt for the e-KYC process, which empowers customers, but customers can now opt not to, even it may limit credit access. 

According to sources, however, a section of the government feels that replacing Aadhaar with other documents is not an economically viable option, and might come up with norms enabling corporates to have access. 

A senior official from the IT ministry said that the government is holding inter-ministerial consultations to evaluate options and a plan would be announced in the next few days. As for de-linking, banks and financial institutions would rather wait until either the banking regulator or UIDAI pronounce the final word. 

Sources say that trade body Indian Banks Association (IBA), along with banks, the Finance ministry and RBI, will chalk out a timeline and procedures detailing the process. Unlike other entities, customers will have to visit bank branches to opt out of Aadhaar linking, while MFIs are likely to undertake it both offline and online. 

Meanwhile, fintech firm are also relying on the government to show the way. 

“Going by the finance and IT ministers’ comments, we feel that the government might back authentication via Aadhaar by law and keep things as it is at the moment. However, if the backing, once done, is challenged in Court, we will face real trouble,” an executive of a leading fintech firm said. 

The primary problem facing these firms face is the escalation in verification costs if they cannot rely on Aadhaar-based KYC.

The scale of the problem is also a daunting issue for banks and telecom firms, which might have to de-link a truly large number of accounts. Nearly all households have bank accounts currently, and over 90 per cent of Jan Dhan accounts opened are linked with Aadhaar. Though opting in or out is now voluntary, de-linking will add to administrative chaos, say bankers. 

What is in the works, folks?
■  Banks, Ministry of Finance and RBI, will chalk out a timeline and procedures detailing the de-linking process
■ Customers will have to visit bank branches to opt out of Aadhaar linking
■ Government is holding inter-ministerial consultations to evaluate options, roadmap to be announced in a few days



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