The Supreme Court verdict in September that private companies can no longer ask for Aadhaar and citizens need not link their bank accounts with the 12-digit identification number has rattled lenders and firms with e-KYC (electronic-know your customer) operations.
“A law has to be passed or a Union Cabinet note has to be issued to allow the legitimate use of Aadhaar-based e-KYC for faster onboarding and to usher in Digital India,” said Vishwas Patel, chairman, Payments Council of India (PCI).
From a business perspective, companies in the lending and remittance sectors have already started looking for alternatives to Aadhaar-based e-KYC.
Prajit Nanu, chief executive of cross-border remittance provider InstaReM, said, “Our customers have been asking us for other options for verification. Globally, we use passport and a picture using webcam to curb frauds.”
Other modes of verification may push up costs for companies, especially in the micro-lending space, as the submission of documents will have to be followed up by physical verification of the customer’s identity.
Vikas Kumar, co-founder of Mumbai-based LoanTap Financial Technologies Pvt. Ltd, said, “Existing policies on OTP-based eKYC only permitted loans up to Rs 60,000. Thus, the Supreme Court decision will impact companies mostly in the micro-loans space. Also, before forming any view, we need to wait for revised RBI (Reserve Bank of India) circular on KYC.” LoanTap is a digital platform that offers loans and overdraft products to salaried professionals.
PCI is expecting some relief and clarification from the finance ministry on the use of Aadhaar. "We are also interacting with various stakeholders and ministries to find a solution to the recent verdict on Aadhaar by the Supreme Court," Patel added.