Govt widens Aadhar ambit: 22 pvt firms can use it to verify customers

Context: Widening the list of non-banking reporting entities, the Finance Ministry has allowed 22 financial entities — including Amazon Pay (India) Pvt. Ltd, Aditya Birla Housing Finance Ltd and IIFL Finance Ltd — to verify the identity of their customers via Aadhaar under the ambit of the money laundering law.

Widening of Aadhar Ambit

  • In a notification dated May 4, the Finance Ministry said these reporting entities, other than the banking companies mentioned, shall comply with the standards of privacy and security under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016.
  • It is necessary and expedient to do so, after consultation with the Unique Identification Authority of India established under sub-section (1) of section 11 of the Aadhaar Act and the appropriate regulator, namely, the Reserve Bank of  India, hereby permits the said Reporting Entities to perform authentication under the Aadhaar Act for the purposes of Section 11A of the Money Laundering Act.
  • Section 11A of PLMA provides for verification of identity by reporting entities. Earlier only banks were considered as reporting entities but now non-banking regulated entities that are considered as reporting entities under PLMA can be allowed to conduct such authentication if their approval is accepted by the UIDAI depending on their data security practices.
  • In, 2019, the government amended the Aadhaar(Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016, under which it allowed only banking and telecom companies to carry out such authentication for KYC requirements.

Application of widening of Aadhaar ambit:

  • E-KYC carried out through OTP-based Adhaar authentication allows entities to offer a limited set of services to their users. Such a KYC has to be renewed every year and the aggregate amount of term loans sanctioned shall not exceed Rs 60000 in a year.
  • It may help in expanding the reach of financial services, especially microfinance.
  • Availability will improve consumption in the Indian economy which fosters the Economic growth of the Nation.
  • It will help in the expansion of the formal credit network in the Indian economy.


  • It may lead to an invasion of privacy: Private companies are profit-oriented and they may misuse this limited permission to target the customers.
  • It may also pose a challenge of financial fraud: in the digital age financial frauds are new realities and allowing private entities to access Addhar data will further increase this threat.
  • Other private entities may demand the same: with time other private companies even those of the non-financial sector can also seek the same permission.
  • Diverting from the aim of Aadhaar itself: Aadhaar was aimed to provide a unique identity to individuals but this widening of the ambit of Aadhaar will make it an instrument of financial matters.

Mains practice question:

Critically analyse the recent step of the Central government to widen the ambit of Aadhaar to allow non-banking entities to access the Aadhar data. (150 words, 10 marks)

Leave a Reply

Your email address will not be published. Required fields are marked *

The maximum upload file size: 20 MB. You can upload: image, document, archive, other. Drop files here

Online Counselling
Table of Contents
Today's Current Affairs
This is default text for notification bar