In the country comprising second largest population in the world, one can only imagine the level of difficulty faced in helping the marginalised. Especially when such population forms much of the populace and is inflicted with poverty to such an extent that they can’t even meet their most basic needs. That’s why; reaching out to this segment of the country has always been on the ambit of every ruling government. But the one that has plagued every government for decades has been that of identifying precisely the location of the recipient of benefits introduced by them of the likes of MNREGA. Ultimately, the wake-up call came when leaks and inefficiencies were identified in the Public Distribution System (PDS) due to which only a portion of subsidies was able to reach its intended recipient. It was implicit that something needed to be done.

The beginning of the efforts for surmounting this challenge came in the form of introduction of the National Identity Card in the year 2003 in 13 states. And more than half a decade later, in 2010, Aadhaar was launched by the then Prime Minister, Dr. Manmohan Singh and then Congress President Sonia Gandhi. The project was launched as a simple tool to further the aim of “inclusive growth” by addressing the leaks in the PDS. But since then Aadhaar has come a long way and has rendered itself as a de-facto national identity. No wonder it is considered as a major milestone of this decade.

But what exactly is Aadhaar? To put it simply, Aadhaar or the unique identification number is a 12-digit unique identification number that any resident of India can obtain through their bio-metrics and demographic data. The repository of this data is maintained by the Unique Identification Authority of India (UIDAI). Till date the enrolment to Aadhaar has reached more than 123 crore Indians.

It has multiple uses in our daily lives, and some of them are of course related to the financial transactions. It has been even linked with the KYC. But now that Aadhaar has pervaded our lives so much, it is of utmost importance to see that adequate measures are taken under Aadhaar act to prevent any of its misuse. It only makes much more sense since what the Aadhaar database comprises of is of private information of the citizens which must not be trampled with. Even Supreme Court has passed judgement on usage of Aadhaar with some caveats.

The recent rulings of Supreme Court have rendered some remarkable amendments, in the Aadhaar act. One of such amendments has removed the compulsory requirement to have the Aadhaar card for opening a bank account or obtaining a sim card. However, linking Aadhaar with the Pan Card is still a necessity.

Keeping all these in mind, the Indian Banks Association (IBA), which represents the banks and financial institutions of India, has sought guidance from RBI, about the revised E-KYC norms, as the delinking of Aadhaar will definitely impact the overall business model and the DBT (Direct Benefit Transfer) scheme.

In the present circumstances, the payment industry, Fin-tech companies and SFBs are trying to align themselves with the RBI guidelines, after the Supreme Court verdict on Aadhaar act, since it has barred the use of paperless verification of customers. RBI on its part has revised the guidelines for opening of an account, which has made the lives of consumers easy.

Let’s just compare the old KYC norms and the new KYC norms, as set by the RBI.

 

 

Photograph                             

OLD KYC

Yes

NEW KYC

Yes

Address proof Yes optional (Any Identity Proof may be

used)

 

Identity proof

 

Yes

 

Yes

 

Proof of current address    

 

 

Yes

 

Yes (Self attested document is

Sufficient in case of different address)

 

 

Aadhar

 

Yes

 

No

 

But the Supreme Court verdict on Aadhaar Act and AML (Anti money laundering act) has come as a rude shock to many payments companies and banks, since digital KYC was one of their USPs.  It brought them into a different league of organisations, where KYC was not at all time consuming. RBI is now devising the process of conceptualising new policies and regulations, keeping in mind the beneficiaries of each company, in compliance with the orders of Supreme Court.

There are many options on the table, but certainly going back from paperless verification to conducting KYC physically with paper documents is not possible neither feasible as many fin-tech companies have based their business models on bio-metrics and Aadhaar card. Some of the provisions that are being considered are Visual Identification, Video Identification, XML-Based structure verification etc.

However, the silver lining is that a person can still open a bank account with the single identity proof pan card, and physical KYC process. This includes submitting the documents or banks sending their officials for verification purpose, which banks generally conduct within 12 months after opening of an account though this can be a short-term solution only. There are many organisations, https://www.fincarebank.com/ which comply physical verification also as per RBI guidelines, which make them a better market holder under current scenarios.