Dudu/New Delhi/Mumbai: Two years after its launch and 22 months after the Reserve Bank of India’s (RBI) first communication that the Aadhaar number would suffice to meet the know your customer (KYC) requirements of banks, there is still some confusion among lenders.
Indeed, despite RBI’s clarification last September that the number, issued by the Unique Identification Authority of India, or UIDAI, would suffice, banks are still reluctant to accept it. Banks insist on KYC norms being met to open accounts. The opening of Aadhaar-linked bank accounts is the key to moving towards a regime of direct transfer of cash subsidies for everything from cooking gas to kerosene to fertilizer.
While 240 million people have been enrolled by UIDAI and 210 million numbers issued, only 150,000 Aadhaar-linked bank accounts have been opened so far. This, despite 60% of the people enrolling seeking a linked bank account.
According to an UIDAI official, part of the confusion has arisen from the last notification of RBI where the banking regulator advised lenders to “satisfy themselves about the current address of the customer by obtaining required proof of the same…”
This person said that this is a routine advisory, but that banks have taken it to mean that Aadhaar alone isn’t adequate to meet KYC norms.
The official, who didn’t want to be identified, said UIDAI is speaking to RBI for a “comprehensive clarification”.
A RBI spokeswoman said “the issue is under our consideration”, in an email.
Meanwhile, bankers continue to remain unclear. A senior executive at a Delhi-based state-run bank said Aadhaar is not acceptable as the “only” proof to open a full-fledged savings bank account, according to RBI’s norms. “UID is being used to open a basic account with restrictions on transactions but not for opening a full-fledged account because it is not a proof of address; the address on the card is the one where the card is made and it may not be the same, especially for migrant labourers,” said this person who did not want to be identified.
Another banker with the country’s largest public sector bank, State Bank of India, said that it is yet to receive a communication from RBI regarding using Aadhaar. “It’s still a third-party proof of concept, and transactions are not yet enabled through UID though 200 million numbers have been issued.” This person, who did not want to be identified, added that banks can use Aadhaar as the only proof required to open a full-fledged account after they get a communication from RBI.
The delay may throw a spanner in the works of UIDAI as well as the Union government which, to use the same words used by UIDAI chairman Nandan Nilekani at a press conference in Delhi on Friday, are trying to make Aadhaar “a unique financial address”.
The use of Aadhaar to meet KYC norms has been a sticking point since the very beginning. In December 2010, even though the finance ministry amended the Prevention of Money Laundering (PML) Rules, 2005, to notify Aadhaar as adequate to meet KYC norms for opening bank accounts, putting it alongside the passport, driving licence, permanent account number (PAN) card, and the voter’s identity card, in January 2011, RBI said all the accounts opened exclusively with the use of an Aadhaar number would be treated as so-called small or no-frills accounts which are subject to various limitations.
RBI issued another notice in September 2011 where it said that it has been decided to accept the letter issued by the UIDAI (unique identification authority of India) “as an officially valid document for opening bank accounts without the limitations applicable to ‘small’ accounts”. However, this is where it added the advisory about due diligence by banks in terms of the current address of the customer—the reason banks cite for dragging their feet over Aadhaar.