Mumbai: The Reserve Bank of India (RBI) has allowed banks to accept letters issued by the Unique Identification Authority of India (UIDAI) for Aadhaar numbers to open savings accounts with no credit limits.

The regulator had in January asked banks to treat all savings accounts opened using Aadhaar letters as so-called no-frills accounts, in which the aggregate credit is limited to 1 lakh in a financial year. Withdrawals and transfers are limited to 10,000 per month and account holders cannot have more than 50,000 in balance at any point of time.

The January notification came a month after the finance ministry amended the Prevention of Money Laundering Rules, 2005, to notify Aadhaar as adequate to meet know-your-customer (KYC) norms for opening bank accounts, putting it alongside the passport, driving licence, permanent account number (PAN) card, and the voter’s identity card.

Mint reported on Tuesday that RBI’s January notification had created confusion among banks over opening accounts using the Aadhaar numbers.

The new notification, published on RBI website on Wednesday, “will streamline the entire process of opening Aadhaar-based bank accounts and provide impetus to Aadhaar-based transactions in the financial sector," said a government official involved in talks with RBI.

“The notification will also clear the confusion that banks had about using Aadhaar as KYC," the official said, asking not to be identified.

The UIDAI aims to provide unique identification numbers to all residents of India under the Aadhaar project. Some 37 million people have been enrolled so far; the Unique Identification Authority targets issuing 600 million numbers by 2014.