The insistence on Aadhaar has been one issue that has polarised public opinion in India like no other. If it made data privacy advocates see red, it drew applause from fans who pointed to the subsidy savings and convenience it ushered in. But the Supreme Court has spoken, in no uncertain terms, in its judgment last week.
What is it?
Aadhaar was originally envisaged as a unique identification number that would enable government agencies running subsidy or welfare schemes to check the veracity of the persons claiming benefits under their schemes.
But soon, the income tax department, financial regulators, a whole host of government agencies and even private firms jumped on to the Aadhaar bandwagon to on board or continue services to their customers. Financial regulators such as the RBI and SEBI and sector regulators such as TRAI, in any case, insist on banks, mutual funds, fintech companies and mobile operators completing a know-your-customer (KYC) process for new clients. Till a few years ago, the KYC process involved furnishing paper proof of identity and address along with the application form. Over the last couple years, with the use of Aadhaar, the KYC process was made electronic and near-paperless.
But for those without the all-important Aadhaar, life wasn’t easy. Those who didn’t or couldn’t get an Aadhaar number because of issues with their biometrics were forcibly debarred from accessing private services. There were instances of the disadvantaged being denied subsidies or schemes offered by the State/Central governments, because of errors in the database or failure of biometric authentication. There were also privacy concerns too with some celebrities finding their personal data put out in the public domain. This prompted privacy advocates to go to court protesting Aadhaar. The apex court has now ruled that there is nothing unconstitutional about Aadhaar, and that it can be insisted upon for getting government subsidies and filing tax returns. However, private entities such as financial institutions, cellular service providers and companies cannot insist on Aadhaar for enrolling customers or continuation of service.
Why is it important?
For private entities, using the alternative method of in-person identity verification and address authentication for on-boarding new customers may not be as quick. The Aadhaar-based KYC process is also 85 per cent cheaper than the regular mode, according to reports. Firms such as IDFC Bank, Jana Small Finance Bank or electronic wallets such as Paytm or PhonePe could be hit with delays in customer on-boarding and increased costs. For telecom companies such as Reliance Jio, which has been enrolling subscribers through Aadhaar since it was flagged off, the pace of customer acquisition may slow down.
Why should I care?
If you have already linked your Aadhaar number with various investments and utilities, the judgment poses a dilemma. While some experts say that private firms will automatically delete the Aadhaar data they hold, others say customers must make written requests to do so. It is best that you take it up with your bank or mobile operator if you want your Aadhaar linkage revoked. But if you are a new customer (to MFs, mobile connections, insurance, etc.), you may have to choose between quick or delayed on-boarding based on whether you wish to provide your Aadhaar.
Not having an Aadhaar is not a problem anymore. But we haven’t heard the last word yet, with most private firms still waiting for clarity from their regulators on how to go forward with customer acquisition.
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