With Aad­haar nixed, banks seek new KYC norms

IBA fears lack of clar­ity fol­low­ing apex court rul­ing will im­pact op­er­a­tions, writes to RBI

The Hindu Business Line - - FRONT PAGE - PRIYANKA PANI

The In­dian Banks As­so­ci­a­tion (IBA), the in­dus­try body rep­re­sent­ing banks and fi­nan­cial in­sti­tu­tions, has writ­ten to the Re­serve Bank of In­dia (RBI) seek­ing re­vised KYC (know your cus­tomer) guide­lines fol­low­ing the re­cent Supreme Court verdict on Aad­haar. The banks are wor­ried about the im­pact on busi­ness due to the lack of clar­ity fol­low­ing the rul­ing.

In a let­ter dated Oc­to­ber 10, seen by Busi­nessLine, the IBA said the Supreme Court or­der has far-reach­ing im­pli­ca­tions for the in­dus­try and for bank­ing op­er­a­tions. For ex­am­ple, the IBA’s let­ter pointed out, Rule 9 of the Pre­ven­tion of Money Laun­der­ing Rules man­dates link­ing of Aad­haar num­ber with bank accounts, has been struck down, but the RBI’s 2013 cir­cu­lar men­tions Aad­haar among the list of doc­u­ments ac­cept­able as proof of iden­tity.

One other con­cern for the IBA re­lates to the direct ben­e­fit trans­fer (DBT) scheme. It said that delet­ing Aad­haar from the data­base will im­pact DBT, and that proper guide­lines should be is­sued in con­sul­ta­tion with the Na­tional Pay­ments Cor­po­ra­tion of In­dia, the nodal agency for all pay­ment net­works. “If the cus­tomer specif­i­cally re­quests for dele­tion of Aad­har, it is pro­posed that the Bank will delink the Aad­har from the cus­tomer’s pro­file...con­se­quently dis­bur­sal of ben­e­fits by the gov­ern­ment agen­cies un­der DBT scheme into des­ig­nated bank accounts may be im­pacted,” the let­ter stated.

The IBA said there is a need for the RBI to clar­ify the sta­tus and that the ear­lier law should pre­vail. Do­ing away with the Aad­haar re­quire­ment may have a sig­nif­i­cant im­pact on the Gov­ern­ment’s fi­nan­cial in­clu­sion and dig­i­tal ini­tia­tives such as BHIM, Aad­haar-en­abled Pay­ment Sys­tem and e-KYC based prod­ucts, among oth­ers, which are pri­mariry based on Aad­haar-en­abled plat­forms, the as­so­ci­a­tion said. “Banks may be al­lowed to con­tinue these ser­vices till re­vised guide­lines are an­nounced,” the IBA said.

“We need a clear di­rec­tion so that there is uni­for­mity in the pro­ce­dures adopted by all the banks,” said a se­nior banker on con­di­tion of anonymity.

Ex­perts say that banks and sev­eral fin­tech firms have de­pended wholly on Aad­haar­based e-KYC and are re­work­ing their busi­ness strate­gies. Go­ing back to the ear­lier mode of do­ing KYC phys­i­cally with pa­per doc­u­ments was not vi­able op­tion, they said.

The apex court had in its Septem­ber 26 rul­ing barred pri­vate com­pa­nies, fin­tech firms, tele­com op­er­a­tors and banks from ask­ing for Aad­haar as an iden­ti­fi­ca­tion doc­u­ment from their cus­tomers, and stated that Aad­haar is not manda­tory for open­ing bank accounts.

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