As Banks Push For Aadhaar Seeding Of Accounts, Government Keeps Tabs On Progress
Banks are being asked for regular updates on Aadhaar seeding of bank accounts, said bankers familiar with the process.
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The central government is closely tracking the seeding of bank accounts with Aadhaar data as lenders push customers to furnish their unique identification number. Government officials are asking banks to submit weekly data on the proportion of accounts that each individual lender has managed to link to Aadhaar, two bankers in the know confirmed. In some cases, the government has also given targets to individual banks, they said.
The government is doing what they did in the case of PMJDY (Pradhan Mantri Jan Dhan Yojana) and taking stock regularly of the progress in Aadhaar seeding of bank accounts, a senior private sector bank executive told BloombergQuint on condition of anonymity.
Banks have been aggressively pushing for Aadhaar linkage of bank accounts even though it is currently not mandatory for opening a bank account. While the Reserve Bank of India (RBI) allows five acceptable options of identity proof to comply with know your customer (KYC) rules, banks are still pushing clients towards the use of Aadhaar for KYC purposes. Earlier this year, the government said that Aadhaar is being made mandatory for filing tax returns.
According to the bankers, the rationale behind the government’s push to link Aadhaar data with bank accounts is threefold. The first of these is the argument that it allows for the smoother transfer of government subsidies into bank accounts and prevents leakages. The second rationale is that it becomes easier to assess the credit quality of a potential borrower using Aadhaar. The third justification is that it is easier to detect and resolve benami accounts if the accounts are linked to Aadhaar, said the first of the two bankers quoted above.
According to a second private sector banker, who also spoke on the condition of anonymity, while the government hasn’t directly instructed banks to link accounts to Aadhaar, seeking a weekly update on the data is pushing banks to hasten the process.
While there has been an attempt to increase the use of Aadhaar in banking, the close scrutiny and tracking of Aadhaar seeding of bank accounts has started only after demonetisation, said the second banker.
In November 2016, the government decided to withdraw Rs 500 and Rs 1,000 bank notes, which led to a currency shortage in the economy. In the months that followed, the government urged consumer to move towards digital payments and launched a number of non-cash means of payment.
Seeding of Aadhaar data with bank accounts could also help the government in spreading the use of Aadhaar Pay, which the government launched last month, the second banker said. Aadhaar Pay is a digital payment option which uses biometric information such as fingerprint scans.
An email sent to the public relations department of the finance ministry, on Monday, remained unanswered.
Banks have been using diverse ways to convince customers to add their Aadhaar data to accounts. Some are luring customers with benefits, while others are sending emails that are coercive.
Earlier this month, BloombergQuint reported that IDBI Bank had sent out mailers which say that it is “compulsory” to link accounts to Aadhaar numbers. Other lenders like HDFC Bank have put out special “offers” in lieu of Aadhaar linkage. Some private lenders like Kotak Mahindra Bank have restricted new digital banking initiatives, like its 811 offering, to Aadhaar linkage saying that customers can open accounts on their mobile phone if they furnish their Aadhaar details.
Relationship managers have also been asked the actively push their customers to send in their Aadhaar numbers, said the first banker.
Gaurav Mashruwala, a financial planner, acknowledged that there are some concerns about the safety of Aadhaar data but added that security risks can emerge in any system.
“There shouldn’t be any issue to the customer with linking bank accounts to Aadhaar. If you are thinking of security concerns then we must remember that leaks can happen anywhere. Bank accounts have been compromised even without Aadhaar data being there,” Mashruwala told BloombergQuint over the phone.
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