The cost of e-KYC verifications for banks, fintech firms and telcos had increased substantially after the apex court ruled that Aadhaar could only be used in direct benefit transfer for welfare schemes (Photo: Pradeep Gaur/Mint)
The cost of e-KYC verifications for banks, fintech firms and telcos had increased substantially after the apex court ruled that Aadhaar could only be used in direct benefit transfer for welfare schemes (Photo: Pradeep Gaur/Mint)

Rajya Sabha clears bill on voluntary use of Aadhaar as ID proof

  • The law ensures that no one is denied any service for not having Aadhaar as ID proof
  • An Aadhaar holder can now opt for offline verification through QR code with consent

The Rajya Sabha on Monday passed The Aadhaar and Other Laws (Amendment) Bill, 2019, allowing voluntary linking of the 12-digit identification number as part of know your customer guidelines to open bank accounts or get a mobile connection.

The law ensures no individual is ever denied any service for not having or producing Aadhaar for authentication. An Aadhaar holder can now opt for offline verification through QR code with consent.

The cost of e-KYC verifications for banks, financial technology companies and telecom service providers had increased substantially after the Supreme Court ruled in September that Aadhaar could only be used in direct benefit transfer for welfare schemes.

It had also barred private companies from using the unique identity number for authenticating customers. Citing privacy concerns, the apex court had last year said that it was not mandatory for customers to link their Aadhaar number with their respective bank accounts or mobile phone numbers.

In February, the Centre had brought in an ordinance to amend three laws—Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016, Indian Telegraph Act, 1885 and the Prevention of Money-laundering Act, 2002—to enable the government’s decision for voluntary use of Aadhaar for fulfilling KYC norms. Thereafter, the Aadhaar and Other Laws (Amendment) Bill, 2019 got Lok Sabha’s approval last week. The bill will become a law after it gets the President’s nod.

The amendments in the law will enable the Unique Identification Authority of India (UIDAI)—the authority responsible for issuing Aadhaar numbers—to hold back the misuse of 12 digit identification number.

“Subsequent to this amendment, no individual shall be compelled to provide proof of possession of Aadhaar number or undergo authentication for the purpose of establishing his identity unless it is so provided by a law made by Parliament," the Centre said in a statement last month.

Further, UIDAI can also impose a penalty of up to 1 crore if an entity fails to comply with the Aadhaar law and does not provide information sought by UIDAI. It also gives an option to children to cancel their Aadhaar on attaining 18 years. According to the proposed amendments, there is a provision to create a UIDAI Fund, which will contain all fees, grants and charges received by the authority. The fund will be used for UIDAI’s expenses.

“This is a welcome move and relief to banks and telcos. But this government had the opportunity to ensure all regulated financial services firms, mutual funds, insurance and payment firms were also covered under the PMLA as they cannot use e-KYC immediately," said Naveen Surya , the non-executive chairman of Fintech Convergence Council.

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