The Indian Finance Ministry Approves The Use Of Aadhaar-Based Authentication For The Kyc Process By 22 Financial Institutions
22 financial institutions, including Amazon Pay (India) and Hero FinCorp, have been permitted by the Finance Ministry to use Aadhaar-based client authentication. This action is intended to speed up the Know Your Customer (KYC) process and streamline the authentication procedure.
The ministry announced that these 22 businesses, which are already required to report to the government under the Prevention of Money Laundering Act (PMLA), will be able to use Aadhaar numbers to confirm the identities of their customers and beneficial owners.
Customers who have to go through the arduous process of presenting physical papers for KYC are likely to be greatly relieved by this step. The process of onboarding new customers can be greatly streamlined by using Aadhaar-based authentication. Additionally, it can help businesses save time and money on operations.
Godrej Finance, Aditya Birla Housing Finance, Tata Motors Finance Solution, IIFL Finance, Mahindra Rural Housing Finance Ltd, Uniorbit Payment Solutions Limited, and V Creditline Limited are just a few of the companies that offer financial services are just a few of the 22 financial institutions that have been permitted to conduct Aadhaar-based client authentication.
Sandeep Jhunjhunwala, a partner at Nangia Andersen LLP, told PTI that while Aadhaar authentication of clients is made available as one of the modes of verification for banking companies, the PMLA act also allows reporting entities other than banking companies to adopt Aadhaar authentication if the central government so notifies them.
As a result, 22 financial institutions and intermediaries have been listed by the CG as being able to use Aadhaar authentication to confirm the identities of their customers and beneficial owners, according to Jhunjhunwala.
Other methods of verification permitted by the Money Laundering Act include offline Aadhaar Act verification, the use of a passport, and any other officially recognized document or method of identification that the central government may notify. The method of verification is chosen voluntarily by the client.
Both the financial companies and the clients are anticipated to benefit significantly from the decision. Financial institutions can use Aadhaar-based authentication to rapidly and effectively onboard new clients, cutting down on the expense and length of the KYC procedure. On the other side, customers can take advantage of the ease of Aadhaar-based authentication, which does away with the requirement for submitting physical papers for KYC.
Financial institutions hope that the Aadhaar-based authentication method will help them minimize fraud and improve the security of client data. Aadhaar-based authentication can assist businesses in swiftly and effectively confirming the customer’s identification, lowering the risk of fraud.
Additionally, Aadhaar-based verification can assist financial organizations in significantly growing their customer base. Companies can onboard new clients from remote locations where the physical paperwork procedure is extremely difficult thanks to the streamlined KYC process.
According to the court, Aadhaar-based verification can only be used for particular objectives and not for generic ones. Additionally, the court ruled that Aadhaar-based verification should be optional rather than required.
In conclusion, the Indian Finance Ministry has approved Aadhaar-based client authentication by 22 financial institutions. This action is anticipated to streamline the customer onboarding process, increase security for the businesses, and likely attract more individuals into India’s formal banking system.