RBI mandates Aadhaar for KYC Verification [Read Circular]

Marco Green
April 22, 2018

The circular states that for the objective of doing customer due diligence, all RBI regulated entities must obtain "from an individual who is eligible for enrolment of Aadhaar", the Aadhaar number, PAN or Form No. 60 as defined in income tax rules. It is still not clear how banks are expected to deal with customer due diligence considering that the new circular amends several of the earlier directions dated February 25, 2016.

RBI has made Aadhaar mandatory for bank accounts till the Supreme Court passes its order on the 12-digit unique identification number. If these details are not available, the customers would have to provide proof that they have applied for these identification documents within the past six months. If an individual customer who does not have Aadhaar/enrolment number and PAN and desires to open a bank account, banks can open a "Small Account", subject to certain conditions.

The RBI reiterated that no account can be opened in an anonymous or fictitious name.

Mumbai: In what seems to be a major step in the Aadhaar row, the Reserve Bank of India (RBI) on Friday said banks and financial institutions would have to verify Aadhaar for due diligence purposes, removing all other sections of "officially valid documents" used by organisations as identity proofs, reported The Times of India.

The mandatory Aadhaar rules, however, will not be applicable in Jammu and Kashmir, Assam and Meghalaya.

Apart from the government banks, RBI has also directed entities regulated by itself, such as banks, non-banking finance companies (NBFCs), payment system providers (PSPs) and prepaid payment instrument issuers (PPI Issuer) to formulate a KYC policy which would include monitoring of customer transactions, risk management strategies and customer acceptance policy among others.

The RBI, however, warned banks that the "information collected from customers for the goal of opening of account shall be treated as confidential and details thereof shall not be divulged for the objective of cross-selling, or for any other goal without the express permission of the customer".

RBI said the KYC norms have been updated following the government's decision to update the "Prevention of Money Laundering" (PML) rules in June 2017. The account will be closed if no biometric authentication is done within a year.

Other reports by Click Lancashire

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