Even though the Supreme Court’s recent ruling has barred private companies from seeking Aadhaar details, banking institutions and telecom companies are still dangling Aadhaar as a carrot for faster customer onboarding, account opening, faster mobile connection and other services. Reason: lower costs and ease of operations.
Supreme Court ruling
The Supreme Court, in its ruling last month, had said that private companies and banks cannot demand Aadhaar IDs from customers, and that it is not necessary for opening bank accounts or getting SIM cards from telecom operators. Besides, it said that the companies cannot use Aadhaar details for carrying out KYC of customers.
BusinessLine spoke to customer care executives at banks, including those at payment banks, and telecom companies, and found out that Aadhaar was still being demanded as the “most important” or “mandatory” document for account opening, or for the purpose of eKYC.
“If you provide Aadhaar details and biometric, we will open your account today itself, or else it will take minimum six to seven working days,” said an executive at a private bank.
“We have been asked to collect Aadhaar and do eKYC through biometric by the company,” said an executive at a payments bank.
Many fintech companies said that they are in a fix after the ruling as their business has been developed around Aadhaar, and they now have to go back to paper-based KYC, which is risky, as the documents can be copied multiple times.
“We are awaiting some more clarification from the RBI. The ruling will kill financial inclusion, as for millions of people in rural and small towns, Aadhaar is the only identification,” said a top bank official on condition of anonymity.
Vinay Bagri, CEO and co-founder of Niyo, a card-based financial product offering salaries to blue-collar workers and to those in rural areas, said: “The SC ruling has sent us back to the stone age. We have built our business on Aadhaar, and it is a huge setback for us as our cost of operations has gone up by 10 times. As a result, we will be forced to charge extra from customers.” An executive working for a top mobile company said that a lot of investment has been made to set up Aadhaar-based KYC norms; so there should be no harm in using the infrastructure if customers want to share their Aadhaar details.
“Initially, we were being forced by the telecom department to put in place an Aadhaar-based KYC system. Now that we have invested money, we are being told that it is not mandatory. So what do we do with the infrastructure set up for the purpose?” asked the executive, adding that almost all telecom operators are accepting Aadhaar for customer identification.
Uses of Aadhaar
“There are two advantages in using Aadhaar. First, it is faster, as we get all the details from a centralised database; second, it is cheaper by nearly a tenth. Earlier, KYC would take two to three days, but with Aadhaar, we can complete the entire process within 10-15 minutes and give customers a new connection,” said the Mumbai-based executive of a telecom company.
According to industry watchers, despite the ruling by the Supreme Court, many customers are themselves sharing Aadhaar details voluntarily to get faster mobile connections.
“We have seen that in some areas, nearly 70-80 per cent KYC for new subscribers is still being done via Aadhaar. We are not even asking for it, but consumers see the benefits,” said the manager of a mobile retail outlet.
Rajan Mathew, President of the Cellular Operators Association of India, said that while the association has asked all its members to abide by the SC ruling, it is still awaiting some clarity from the Department of Telecom. – The Hindu Business Line