Financial Technology Companies may soon be allowed to access Aadhaar database to perform KYC verification. The Economic Times reported that a revenue department note has been circulated that hints that entities providing non-banking financial services, (that are bound by the Prevention of Money Laundering Act, 2002), will be allowed access to the biometric identification database if they follow Aadhaar's privacy and security standards.
The move will be especially beneficial to mobile wallets and digital lending service providers that have faced issues in providing extensive financial services to its customers who fail to complete lengthy KYC procedures.
ET reported that the note was communicated to all financial regulators, including the governor of RBI and SEBI's chairman, on 9 May, mentioning that the respective regulators and UIDAI has to satisfied with the credentials of the entity. For example, while payment companies are regulated by RBI, activities of brokerage firms are overseen by SEBI and the respective entities will need to seek approval from their respective regulators to enable Aadhaar based e-KYC.
Following the approval from regulators, these entities will have to apply to the UIDAI (Unique Identification Authority of India), which will conduct a privacy and security examination. A request will then have to be raised with the Ministry of Finance, it said.