Kotak Mahindra Bank has temporarily suspended its scheme '811,' that helps customers open digital savings accounts. The decision was taken on account of the Supreme Court verdict that does not allow using Aadhaar as a mandatory identity and KYC proof in banks.
The KYC or know-your-customer guidelines mandated by the Reserve Bank of India (RBI) allows the banks to use six valid identity proofs, including Aadhaar, to fulfill the requirement. The bank reportedly used the 811 scheme to open close to 75 percent of the new accounts and is presently looking at alternatives that do not go against the verdict.
The scheme was launched in March 2017 to provide zero-balance savings accounts to customers. The name 811 was chosen to represent the date of demonetisation-11 November 2016, and the programme was to aid the digitalization drive that took a huge hit soon after. The scheme allowed the users to complete their E-KYC through Aadhaar authentication process that just requires entering an OTP sent to the registered number.
In September, however, the Supreme Court announced that the customers were to not be denied any banking services like opening an account for lack of an Aadhaar number and those with Aadhaar cannot be forced to link it with their bank account either.
The 811 was promoted as a downloadable digital bank that gave customers a completely digital and paperless account opening experience. It only required Aadhaar and PAN numbers, to complete the KYC process. Reports suggest that Aadhar authentication process to verify details like name, date of birth, etc was not just convenient but cheaper for banks, who otherwise incur additional cost on KYC verification.