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SC verdict on Aadhaar rattles companies with eKYC and lending operations

SC verdict on Aadhaar rattles companies with eKYC and lending operations
Photo Credit: Photo Credit: Shah Junaid/VCCircle
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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.

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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. 


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