SEBI Circular

SEBI’s Approval on Aadhaar e-KYC for Securities Market

SEBI’s Approval on Aadhaar e-KYC for Securities Market

SEBI issued guidelines regarding the utilization of e-KYC Aadhar Authentication Services in the securities market. The guidelines aim to streamline the e-KYC process by adhering to the regulations to promote financial inclusion. The circular describes previous Know Your Clients (KYC) standards for the securities market, which include arrangements for Aadhaar-based e-KYC procedures as well as authentication services for Investors under the Prevention of Money Laundering Act, 2002. A current Gazette Notification dated March 14, 2024, has included four more entities allowed to make use of the Aadhaar authentication services of UIDAI under the Prevention of Money Laundering Act, 2002. The circular pointed out entities that need to comply with the procedure outlined in the SEBI circular of October 12, 2023 and any type of additional guidelines suggested by UIDAI. This circular added 4 entities to comply with the procedure outlined in the SEBI Circular for authentication in the securities market. KUAs are in charge of promoting the onboarding of these entities as sub-KUAs to supply Aadhaar confirmation services for KYC functions. The circular is released under Section 11(1) of the Securities Exchange Board of India, intending to secure investors and protect them in the securities market.

SEBI’s Mandate for the Securities Markets

The SEBI is the regulatory authority entrusted with overseeing and regulating the securities market in India.

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Regulation of Securities Markets

SEBI manages numerous segments of the securities market, including stocks, bonds, and derivatives, to ensure fair practices, transparency, and investor protection.

Investor Protection

SEBI functions to protect the interest of investors by applying strict laws, promoting investors, promoting education, and ensuring transparency in the procedures of market operations.

Providing Guidelines

SEBI has issued circulars and regulations to market intermediaries, listed companies, and various other investors to ensure conformity with regulative criteria and promote market integrity.

Enforcement of Regulations

SEBI has the authority to investigate and take enforcement actions against entities or individuals found to be engaging in fraudulent practices in the securities market.

Promoting Market Development

SEBI intends to foster the growth or development of the securities market in India by presenting innovative products, urging technical improvements, as well as advancement and attracting domestic and foreign investments.

Guidance of Intermediaries

SEBI controls various intermediaries operating in the securities market consisting of stockbrokers, depositors, mutual funds and rating agencies to maintain the market integrity and protect the investor interest.

Assigning of Sub-KUA

Entities allowed to undertake UIDAI’s e-KYC Aadhaar Authentication services in the safety and securities market are designated sub-KUA (KYC User Agency). These entities play a vital function in promoting Aadhaar authentication services for KYC purposes to ensure compliance with regulatory requirements for the protection of investors in the securities market.

Compliance and Regulations Relating to the UIDAI

Compliance and regulations concerning the utilization of Aadhaar authentication services in the securities market are vital for keeping standard methods and ensuring regulatory adherence throughout the market. Entities associated with utilizing the Aadhar authentication services must strictly adhere to the prescribed procedure outlined in the SEBI circular dated October 12, 2023.

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This prescribed process likely incorporates numerous actions that entities must follow when conducting Aadhaar-based e-KYC (Know Your Clients) procedures. These actions might consist of getting specific authorization from investors for Aadhaar authentication, verifying the credibility of Aadhaar information given by investors, and securely handling sensitive personal information by data protection regulations.

Furthermore, entities must comply with any additional requirements mandated by the Unique Identification Authority of India (UIDAI)1, the governing body in charge of UID confirmation services. These requirements consist of keeping durable security procedures to safeguard Aadhaar information from unauthorized access or misuse, regulatory upgrading systems to ensure compliance with developing regulatory standards and participating in the assessments to verify compliance with Aadhar authentication guidelines.

By adhering to the prescribed process outlined by SEBI and complying with UIDAI’s additional requirements, entities can ensure that they operate within the framework of regulatory standards. This not only promotes trust and confidence among investors but also contributes to the overall stability and security of the securities market.

Expansion of the Authorized Entities by SEBI

The recent notifications indicate a development in the number of entities authorized to use Aadhaar authentication services offered by the Unique Identification Authority of India (UIDAI) under the Prevention of Money Laundering Act, 2002. This notification issued by the Department of Revenue and Ministry of Finance offers to expand the scope of entities allowed to conduct Aadhaar-based e-KYC procedures within the securities market.

This development is a considerable growth in the regulatory landscape of the securities market as it shows ongoing initiatives to enhance the effectiveness of the Know Your Clients (KYC) procedures. KYC procedures are necessary for verifying the identity of the investors as well as reducing the risk of financial crimes, such as money laundering as well as terrorist funding. By permitting a greater number of entities to make use of Aadhaar authentication services, regulatory authorities intend to enhance and also accelerate the KYC confirmation procedure while preserving security standards.

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The incorporation of new entities underscores dedication to promoting more comprehensive accessibility to financial services and investment opportunities for individuals throughout different sections of society. It promotes financial inclusion by allowing more effective onboarding procedures for investors.

Furthermore, the expansion of the authorized entities aligns with the wider goals of promoting digitalization and innovation in technology in the financial sectors. Aadhaar authentication services leverage biometric and market details saved in the Aadhaar data source, allowing fast and safe confirmation of the individual’s identification. By using Aadhaar-based e-KYC procedures, entities can improve customer onboarding, decrease documentation as well as boost operational effectiveness.


SEBI’s guidelines on e-KYC Aadhaar Authentication services in the securities market stand for substantial action in the direction of digitization, efficiency and compliance enhancement. By leveraging Aadhaar-based authentication, market individuals can enhance KYC procedures, reduce threats, and contribute to the overall integrity and growth of the securities market. SEBI’s circular issued the incorporation of 4 new entities for e-KYC Aadhaar Authentication, which reflects the regulatory authority’s proactive approaches to strengthening KYC standards or norms for securities measures in the securities market. Market intermediaries need to adjust to these regulatory changes to ensure smooth compliance and safeguard the investor interest. These guidelines mark a development action in the direction of promoting trust and financial integrity within India’s financial systems.




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