RBI Notification

RBI allows NBFCs, PSOs to apply for Aadhaar e-KYC Authentication License

The RBI notified recently that it has invited applications from NBFCs, payment system providers and payment system participants seeking to obtain Aadhaar e-KYC Authentication License.

RBI notification on Aadhaar e-KYC Authentication License

As per the (Section 11A), Prevention of Money Laundering Act 2002, the government, through notification, can allow entities apart from banking firms to authenticate Aadhaar number of client using the e-KYC facility provided by Unique Identification Authority of India. However, the notification shall be issued only after consultation with the UIDAI and the appropriate regulator.

Further, the RBI said in a statement that a detailed procedure for processing of applications under Section 11A for the use of Aadhaar authentication services by entities apart from banking companies is already provided by the Department of Revenue, Ministry of Finance on 9^th May 2019.

The RBI further stated that those Non-Banking Financial Companies, payment system providers and payment system participants seeking to obtain the Aadhaar Authentication License- KYC User Agency (KUA) License or sub-KUA License issued by Unique Identification Authority of India can submit the application to this department for onward submission to UIDAI^[1].

Procedure for processing applications under Section 11A for the use of Aadhaar authentication services by entities apart from banking companies

As mentioned above, the procedure has already been provided by the Department of Revenue, Ministry of Finance on 9^th May 2019. The following procedure has been laid down for entities which seek to carry out authentication of client’s Aadhaar number through e-authentication facility:

• Application

Applications by concerned entities shall be filed before the appropriate regulator under Section 11A of the PML Act 2002 for the use of Aadhaar authentication services. The regulator can specify any format in which information from the applicant is to be obtained.

• Examination by Regulator

The regulator will examine the applications that have been filed before it, on submission of the prescribed fees in order to ensure that the requisite conditions under Section 11A of the Act & any other requirements laid by the regulator and those under law are met by the applicant. In case where the proposed purpose for aadhaar authentication is necessary, then the appropriate regulator shall forward the application to UIDAI with its recommendation.

It may be noted that an application can be rejected if it is found on scrutiny that the applicant has failed to fulfil the requisite conditions.

• Examination by UIDAI

The Unique Identification Authority of India will scrutinize the applications it has received from different regulators, on submission of prescribed fees, if any. Every application shall be examined in light of the recommendations obtained from the appropriate regulator. UIDAI shall specify any format wherein any additional information is required from the applicant for its examination for grant of Authentication User Agency /E-KYC User agency license.

The examination will be done on the basis of privacy and security standards specified by the UIDAI from time to time under Aadhaar Act and Regulations framed therein.

Once the examination is completed, UIDAI will send its recommendations along with other conditions, if any, to the Revenue department for notification under Section 11A of the Prevention of Money Laundering Act 2002.

• Notification by the Central Government

If the Central Government is content with the recommendations of the regulator and UIDAI that the applicant has met all conditions specified under Section 11A, by notification can allow such an applicant to perform authentication under clause (a) of Section 11A.

• Issuance of Authorization

As per the permission given by the Central Government, UIDAI would issue authorization required to the applicant for conducting authentication. It will be subject to payment of fees and compliance of the terms and conditions of KUA/AUA license under the Aadhaar Act.

As mentioned earlier, those Non-Banking Financial Companies, payment system providers and payment system participants seeking to obtain the Aadhaar Authentication License- KYC User Agency (KUA) License or sub-KUA License issued by the Unique Identification Authority of India can submit the application to the department for onward submission to UIDAI.

The Reserve Bank also stated that the applications can be forwarded over mail. The format of the application has been provided on the RBI website.

Potential implications of allowing NBFCs and PSOs to get Aadhaar e-KYC Authentication License

Permitting NBFCs and PSOs to get Aadhaar e-KYC Authentication License will help MSME lenders to accelerate the time taken to onboard borrowers and provide credit to them.

Further, one of the experts made the statement that the borrowing experience will improve. There are various stages in the customer onboarding process, verification of KYC etc. Often this is time consuming as the borrower gives documents which are verified and tested. Manual process will get eliminated, and in that manner, it could be beneficial.

Conclusion

The Reserve Bank had issued the notification on Aadhaar e-KYC Authentication License on 13 September 2021. It has been issued for the chairpersons and CEOs of all NBFCs, Payment Service Providers and Payment System Participants. You may refer the RBI notification attached with this article.

EKYCCD5A7A5B2F70471883B6E45D84E35855