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Furnishing your Aadhaar number is now mandatory for filing tax returns. But tax authorities aren’t the only ones coming after your unique identity number. Banks are also pushing (and in some cases forcing) customers to link their accounts to their Aadhaar numbers.
Over 1.13 billion Indians now have an Aadhaar, a unique identity number, which, over time has become the government’s preferred way of identifying citizens. Social benefits have been linked to the biometric based identity proof as a way to reduce leakages.
Starting this fiscal year, Aadhaar has also been made compulsory for tax filing – a decision which is under review at the Supreme Court. For banking services, however, the Aadhaar card is still only one of six acceptable KYC (know your customer) documents listed by the Reserve Bank of India (RBI).
BloombergQuint accessed copies of the email sent by the bank to three different customers. The mail, produced here, tells customers that linking a savings account to Aadhaar is compulsory.
The bank has not yet responded to a 17 April BloombergQuint email seeking comment.
Some customers of IDBI Bank have taken to Twitter to register their complaints. In response, the bank’s official handle clarified that while it is not mandatory to link bank accounts to Aadhaar numbers, customers are encouraged to do so.
Other banks appear to have stayed away from the use of the word ‘mandatory’ in their communication but are encouraging customers to share their Aadhaar information. Only when specifically asked are banks clarifying that furnishing Aadhaar information is not mandatory.
Yes, banks are. But here’s the catch: a reading of the Aadhaar Act shows that it allows the unique identification number to be used for KYC purposes by private agencies, such as banks, provided that the use is pursuant to set down laws and obligations.
In fact, nothing in the Aadhaar Act prevents banks from making Aadhaar linkage mandatory for customers. This is despite the fact that in a 2015 order, the Supreme Court had said that Aadhaar cannot be mandatory for available benefits under welfare schemes.
Rahul Matthan, a partner at law firm Trilegal, explained that the Supreme Court’s judgement applies to government provided services alone. This suggests that banks are on firm footing in asking for Aadhaar documentation.
Bankers agree that the Aadhaar is not mandatory. In cases where there is a push back from customers, the banks acknowledge that customers have a choice in the matter. Yet their communications to customers, such as the one from HDFC Bank, suggest a sense of urgency and even a deadline. HDFC Bank declined to comment on this story.
A senior official from a private bank, speaking on condition of anonymity, said that banks are acting preemptively because there is no clarity on whether Aadhaar would be made mandatory for banking in the future. In order to prevent a sudden need to link bank accounts to Aadhaar numbers, banks are trying to seed as many accounts with the unique identity as possible.
Rajiv Anand, head of retail banking at Axis Bank, said that lenders are also keen to link accounts to Aadhaar as it helps improve the customer experience. Axis Bank is using Aadhaar for multiple aspects of banking such as the Aadhaar-enabled Payment System – Aadhaar Pay and for e-KYC.
Financial planners, meanwhile, suggest that Aadhaar might become mandatory for banks in the future though right now the choice lies with customers.
“Banks already have your PAN and other data. Providing Aadhaar can’t be more dangerous so people should provide it but those who don’t have it can still tell banks that they don’t want it since there’s no legal requirement yet,” said financial advisor Gaurav Mashruwala.
(This story was originally published on BloombergQuint)
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