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Aadhaar Decision: Banks, financial & Telecom companies are Frustrated

Telecom companies

Banks, financial institutions and telecom companies are likely to face increased costs and a slowdown in enrolment of new subscribers after the Supreme Court struck down provisions in Section 57 of the Aadhaar(eKYC) Act in a historic judgment on Wednesday. The apex court Wednesday struck down Section 57 of the Aadhaar (Targeted Delivery of Financial and other Subsidies, Benefits and Services) Act, 2016 that permitted private entities like telecom companies or other corporates to avail of the biometric Aadhaar data.

In the last few years, banks, fin-tech companies, and telecom companies service providers have used Aadhaar-based electronic know your customer (e-KYC) to acquire millions of new users, but with the court ruling that private telecom companies cannot mandate Aadhaar-based authentication, the business will be hurt, said industry executives.

Telecom company’s industry estimates put the number of Aadhaar-linked subscribers at around 500 million — mostly in urban areas — which is around 50% of India’s total mobile customer base. Moreover, over 80% of new users were being enrolled using the Aadhaar e-verification process.

What did say these business people about this decision

Said Telecom Companies Executive

We will be pushed to the old days where it will take you six days to get your number. Telecom companies fear this will delay penetration in rural areas where teledensity just about 60% compared to 150% in urban India. The telecom industry expects the lack of eKYC to delay the time taken to activate a new mobile phone connection, while also raising the cost of customer acquisition by as much as ten times.

Cellular Operators’ Association of India (COAI) Wednesday said it will examine and assess implications of the Supreme Court judgment, which states that it will not be mandatory for customers to link Aadhaar for mobile connections and bank accounts.


Amit More(Finzy founder) Said

Finzy founder and CEO Amit More said the decision would also impact many fin-tech companies (including peer-to-peer lending platforms), digital banks and non-banking financial companies that rely “heavily” on Aadhaar-based eKYC verification.

Pointing out that Aadhaar Virtual ID and UID token were introduced earlier this year keeping in mind the privacy concerns. More said one would need to see the impact of the SC verdict on these additional security layers.

Rajnish Kumar(SBI chairman) Said

The bank has linked 80% to 85% of its savings bank accounts with Aadhaar but will comply with the court’s order. “Whatever is the SC judgment everybody will have to honor but from a service point of view, I believe that it (AadhaareKYC) is a great facility. Today, we open 27,000 accounts per day digitally, but there cannot be any compulsion,” Kumar told reporters.

CV Madhukar(Digital Identity & Omidyar Network) Said

“Companies doing eKYC for onboarding customers impacted. And there could be a temporary setback as costs and time of enrolment are likely to go up,” said CV Madhukar, global digital identity initiative lead at Omidyar Network.

Supreme Court

Adhil Shetty(founder of BankBazaar) Said

“KYC will continue, but it will remain optional for consumers. I believe that a lot of customers will choose Aadhaar-based authentication against other modes because of the convenience factor,” said Adhil Shetty, founder of BankBazaar, a digital lending marketplace.

OTP-based eKYC had helped an increasing number of people access financial products over their mobile phones. It increasing the penetration and reach of such products and raising levels of financial inclusion,” he noted.

Nandan Nilekani(architect of Aadhaar) Said

Nandan Nilekani, the architect of Aadhaar, said the verdict recognizes an individual owns his or her data. “Aadhaar includes, doesn’t exclude. The resident was once again recognized as being at the heart of the project. And they have gained new rights that help them assert their ownership over their data,” he wrote in a statement.

Gopal Bohra(Partner at NA Shah Associates LLP) Said

Gopal Bohra said the apex court has applied a balanced approach – making mandatory use of Aadhaar at certain places. Such as filing of the income tax return and also restricting the data sharing with private parties.

Others Comments

Many tech-savvy lenders such as Kotak Mahindra Bank, Jana Small Finance Bank, and Ujjivan Small Finance Bank. Which made a quick move to expand their customer base to smaller towns. And migrant laborers in cities will also see an impact, said industry sources. Several fin-tech industry executives are of the view that Wednesday’s verdict allows regulated entities including banks. The non-banking financial institutions and digital wallet companies to offer eKYC. It for individuals who opt to share their Aadhaar details.


A senior government official, however, disputed this and said eKYC by any private entity through Aadhaar is now not possible.

Supreme Court Order

The Supreme Court has also directed that metadata storage reduced to six months from five years. Speaking to media, a government official said while there is an option to bring enabling sectoral rules. Such a measure “will have to pass the test of proportionality. Its necessity and legitimate aim of the state apart from getting the backing of the law, in order to allow any kind of linkage in the future”.

“This ruling making mandatory linking of Aadhaar with PAN will help the government in curbing tax evasion,” he said.


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