The Finance Ministry has authorised 15 securities firms to conduct Aadhaar-based customer verification, according to a notification issued by the Revenue Department.
The approved firms include SBICAP Securities, IIFL Securities, and Angel One, among others. The notification, issued under the Prevention of Money Laundering Act, allows these firms to use Aadhaar for the Know Your Customer (KYC) process.
Other entities granted permission include JM Financial Services, Arihant Capital Market, SMC Global Securities, Aditya Birla Money, R.K. Stock Holding, Monarch Networth Capital, RKSV Securities, Comfort Securities, and OPG Securities Pvt Ltd., reports PTI.
In 2023, the Ministry of Electronics and IT (MeitY) proposed expanding Aadhaar authentication to include a broader range of private entities for various services, aiming to enhance digital identity use beyond government departments. This move is part of broader reforms to strengthen the Prevention of Money Laundering Act (PMLA) and address potential loopholes ahead of an upcoming evaluation by the Financial Action Task Force (FATF), the global watchdog for money laundering and terrorist financing, reports The Indian Express.
The proposal aligned with Section 11A of the PMLA, which permits identity verification by reporting entities. E-KYC using OTP-based Aadhaar authentication allows entities to offer limited services, with an annual renewal requirement and a cap of Rs 60,000 on term loans.
Previously, in 2019, the Aadhaar Act was amended to restrict authentication for KYC purposes to banking and telecom sectors, following a 2018 Supreme Court ruling that deemed Section 57 of the Aadhaar Act “unconstitutional”. This provision had allowed private companies to use Aadhaar data, a practice challenged in court.
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It was under this provision that private companies like Paytm and Airtel Payments Bank sought Aadhaar details from customers prior to the landmark judgement. Even the subsequent 2019 amendment was challenged in the Supreme Court.
According to amendments proposed to the Aadhaar Authentication for Good Governance (Social Welfare, Innovation, Knowledge) Rules, 2020 by the IT Ministry, private entities and state governments would be allowed to conduct Aadhaar-based authentication for promoting “ease of living” of residents and enabling better access to services for them, among other things.
