- A finance ministry release states tha there have been talks with Reserve Bank of India, UIDAI and the National Payments Corporation of India (NPCI) to discuss the possibilities of permitting Non-bank entities to perform Aadhar test electronic KYC for authenticating customer credentials.
- If this is agreed, the entities like NBFCs, Fintech lenders, Peer to Peer lending platform and digital wallets on board.
- If given the nod, this would let entities such as NBFCs, Fintech lenders, peer to peer (P2P) lending platforms and digital wallets on-board new account applicants in an electronic and paperless manner, which of-course is a departure from the costly and time-taking physical KYC on-boarding procedure that these companies must currently follow.
- However, the government is hesitant to allow these nonbanks direct access to the UIDAI database, as per another source with direct knowledge of the matter. The vetting process would most likely be supervised by a third-party entity, with NPCI emerging as a likely candidate to take on this mandate.
- The Supreme Court, citing privacy concerns, had struck down the mandatory use of Aadhaar to complete the eKYC process for all financial entities in its landmark Aadhaar verdict in September last year.
- Subsequently, amendments in Prevention of Money Laundering Act (PMLA) allowed regulated banks to use Aadhar as a non-binding document to open new accounts.
- The eKYC authentication requires the collection of an individual’s biometric information, which is then matched with the UIDAI database for vetting the customer credentials.
- It has been a long-standing demand of both the NBFC and fintech sectors to be allowed access to the UIDAI database to electronically authenticate customers as it significantly reduces the cost of on-boarding through physical means, and the logistics costs of storing the physical documents of these customers.
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