Regulated entities in the financial sector stand to benefit from a KYC plan in the works.
Aadhaar-based eKYC is used for paperless verification of a customer’s credentials for new mobile connections and bank accounts. The platform is expected to go online in the near future, sources told TOI.
The new platform will enable entities that are regulated by the RBI, Sebi or the insurance and pension regulators to register on it. This will eliminate the need for these entities to individually register for undertaking eKYC using Aadhaar, while also ensuring that user data is not shared with the players using the platform.
As per the press release, the idea is to ensure that at best the last four digits are available to the financial services players and even the masked data of the consumers is not shared. Users will also not have to share physical copies of their documents, which often result in misuse and data theft.
Once implemented, the platform is expected to help several non-banking finance companies (NBFCs) reach out to consumers to offer loans apart from aiding fintech players and insurance intermediaries.
In April 2020, Biometric Update has reported that Aadhaar biometrics and Unique Identification Authority of India (UIDAI) services can be used on a voluntary basis for authentication by 29 insurance companies to meet KYC requirements.
India’s federal government followed the move by extending voluntary biometric authentication to nine financial market entities, including BSE, National Securities Depository, and Central Depository Services (India). The Finance Ministry authorised the changes with a pair of notifications.
The Insurance Regulatory and Development Authority of India (Irda) sets the regulations for the insurance industry, while the Securities and Exchange Board of India (Sebi) regulates securities firms. Both are subject to the privacy and security standards contained in the Aadhaar Act. Sebi stated its support for eKYC checks through Aadhaar in 2019, and issued its own framework for how it would work.
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