Home > industry > Aadhaar virtual IDs becoming a real problem for NBFCs

Mumbai: The Unique Identification Authority of India’s (UIDAI’s) plan to make non-banking financial companies (NBFCs) use Aadhaar Virtual IDs to authenticate customers from 1 July has put these firms in a fix.

The government introduced 16-digit virtual IDs in a bid to address privacy concerns around sharing Aadhaar numbers at the time of authentication. While agreeing that protecting privacy is a good move, NBFCs point out that using virtual IDs will give them access to limited details about the customers, which may make lending more difficult.

Earlier, the Aadhaar data of all customers were synced with credit bureaus, which allowed NBFCs to do eKYC without the need for physical verification, said a digital strategy officer of a top NBFC. He did not want to be named, given the sensitivity of the issue. Since virtual IDs mask the Aadhaar number, NBFCs believe the cost of customer acquisition will rise as they have to do additional physical checks.

NBFCs also point out that many customers are not fully aware of Aadhaar virtual IDs as UIDAI is yet to publicize this new system. These firms, the above-cited executive said, are concerned that “it would be left to them to push customers to register for virtual IDs", increasing the cost of customer acquisition.

NBFCs are also miffed with a 16 May circular, wherein UIDAI has classified entities as global AUAs (authentication user agencies) and local AUAs, depending on their access to Aadhaar data for customer verification. Banks and life insurers have been categorized as global AUAs and allowed to use Aadhaar numbers to do eKYC verification. On the other hand, NBFCs, home financiers, prepaid instrument issuers and telecom companies have been classified as local AUAs and must use Aadhaar virtual ID to perform a one-time-password-based customer authentication.

NBFCs and other industry bodies, including the Payment Council of India, have raised these issues with UIDAI and sought more time for this transition.

“While we understand the concerns around Aadhaar, the UIDAI’s differentiation of global AUAs and local AUAs is not understood," said Naveen Surya, chairman, Payment Council of India.

UIDAI CEO Ajay Bhushan Pandey did not respond to phone calls seeking comment.

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