Fintech companies have asked the government to issue a clarification that will allow regulated entities such as banks and non- banking financial companies (NBFCs) to use Aadhaar for eKYC in case of “voluntary submission” by customers.
This follows the Supreme Court striking down Section 57 of the Aadhaar Act, that allowed private entities to use Aadhaar for verification purposes.
Impact fintech firms
The decision impacted fintech players most of whom were dependent on Aadhaar-based eKYC for quick and cost-effective verification of customers. “In our last meeting on digital payments, it was pointed out that for up to 60% of authentication of their applicants, digital lending organisations use Aadhaar eKYC,” a senior IT Ministry official said.
The official added that post the Aadhaar verdict, such organisations are now required to move to paper-based or physical verification, which would be costly and raise sustainability concerns. According to an internal note of the Ministry, it is estimated that up to 50 crore citizens have only Aadhaar as proof of identity. Also, exclusion of e-KYC would increase the per customer cost of loan processing by almost six times while increasing the overall loan disbursement time.
“Aadhaar-based eKYC made it possible for several companies to extend credit, offer savings and investment products and insurance.
“Fintech companies have requested that Ministry of Electronics and IT should clarify that regulated entities such as banks and NBFCs, are permitted to use Aadhaar eKYC in case of voluntary submission of Aadhaar by customers,” the official said.
Additionally, these entities have proposed that a working group or an advisory group be formed for further discussions. “They have also requested that Aadhaar be recognised as official valid document for entities under PMLA to perform eKYC only after consent of the customers while pointing out to a need for creating a broader construct for both regulated and unregulated entities,” the official added.
