Banking on Aadhaar: What concerns the RBI?
Will RBI answer serious concerns that it had raised about financing terrorism and money laundering before reluctantly agreeing to use Aadhaar in 2011?
On the 11 August 2015, the Supreme Court of India reiterated for a fourth time that Aadhaar number cannot be a condition for obtaining any benefits otherwise due to citizens. The apex court also asked the Union of India to give wide publicity in the electronic and print media including radio and television networks that it is not mandatory for a citizen to obtain an Aadhaar card. It also directed that Unique Identification Number (UID) or the Aadhaar number will not be used for any purpose other than the public distribution scheme (PDS) and in particular for the purpose of distribution of food grains and cooking fuel, such as kerosene and the LPG distribution scheme.
For the first time since the SC’s orders on the matter, Nandan Nilekani, former Chairman of UIDAI, launched a campaign against the order. Following him shortly was his friend Dr Raghuram Rajan, the Governor of the Reserve Bank of India (RBI). The RBI followed by moving the Supreme Court seeking clarification of the apex court's order of 11 August 2015.
Surprisingly, market regulator Securities and Exchange Board of India (SEBI) too has asked for clarification.  
Implementing this order means that the Aadhaar can no longer be used by banks for know-your-customer (KYC), linking with bank accounts or transferring money.
Since January 2011, the RBI had accepted the use of Aadhaar number as one of the documents that may be used for KYC. Since it is only one of the documents used for opening a bank account, the SC’s orders should not really concern the RBI. Furthermore, the RBI's own KYC standards actually prohibit the use of non-document based methods like the Aadhaar for opening bank accounts. Since only 0.03% of those who were issued Aadhaar have not had other documents, no great achievement of ‘including the poor’ can be accomplished by insisting on Aadhaar.
Linking a bank account with an Aadhaar number has no advantage either to the bank or the customer. This is because the customer’s permanent account number (PAN) number which has been issued by the Income Tax Department is already linked to all bank accounts. The PAN number actually provides much more information than the Aadhaar number and is linked with all financial instruments of the banks’ customers. 
The RBI runs National Electronic Fund Transfer (NEFT) and Real Time Gross Settlement (RTGS) to transfer money. Neither of these needs an Aadhaar number to effect money transfers. None of these electronic transfers which are regulated by RBI are impacted by the order. So why is the RBI really upset? 
The order does affect the Aadhaar Based Payment System (ABPS) run by National Payments Corporation of India (NPCI), a section-8-company under the Companies Act. This payment system requires Aadhaar. Serious concerns about money laundering through Aadhaar-based payment systems have gone unaddressed since they were first raised in Moneylife more than a year ago. 
RBI, as the regulator, has not stepped in to cancel the payment system or even to investigate the serious "design" flaws that can facilitate money laundering. Neither the NPCI nor the RBI has issued any clarification to allay the concerns.
Strangely, the government's direct benefit transfer (DBT) is using ABPS (and not RBI’s NEFT or RTGS) to transfer lakhs of crores of rupees to uncertified, unverified, unaudited bank accounts that are highly volatile and mobile in their linkages to effect money transfers that ironically become anonymous and untraceable like bitcoins. It is not possible to distinguish between PDS and LPG subsidy transfers from any other money transfers making it very easy to siphon subsidy or effect money laundering.
RBI itself has no information about authenticity, security and auditability of NEFT or RTGS and ABPS. It has no information about the comparative capital and operating costs for these platforms or the means to cover these costs.
The regulator’s indifference, nay bias, has been most surprising. By raising the need for clarification, it now becomes ever more important for the regulator to answer the serious concerns that RBI's own had raised about financing terrorism and money laundering before reluctantly agreeing to the use of Aadhaar in 2011. It is even more important that an independent court monitored probe investigate the serious Pandora box of money laundering and financing terrorism unleashed by the Aadhaar linkage to bank accounts and money transfers.

"Transformational" banking through third party IDs

  1. An ID number is issued to you by an “Authority” based on the data submitted to them by private enrollment agencies.
  2. These agencies are allowed to keep the data and the number and also get paid for the data they submit.
  3. Banks accept this ID number as the sole KYC.
  4. Banks accept remote electronic submission of IT as e-KYC, no need for the account holder to physically go to the bank.

Unanswered questions:

  1. Who is responsible to certify and verify the ID and hold liability for frauds?
  2. Who is in possession of your bank account if a rogue enrollment agency submits your ID number to open a bank account under the new transformed process?
  3. How are shell accounts prevented in this?
  4. If neither the third party nor the bank ever audit or verify the ID, how can shell accounts be prevented?
(Dr Anupam Saraph is a Professor, Future Designer, former governance and IT advisor to Goa’s former Chief Minister Manohar Parrikar and the Global Agenda Councils of the World Economic Forum.)
9 years ago
I do not understand the apprehensions of people like Dr.Anupam Saraph. He continues to say that it is not correct. Why cannot you suggest a solution. It's high time this country had an identity system. Talking of PAN and Passport, both of which are not mandatory for a citizen. The only way is the Aadhar. Technology now helps in solving this major problem much more systematically. Agreed all these would have to be refined over a period of time as new learnings would necessitate change.But not doing anything to address the problems is ridiculous. Next time some one raises such problems moneylife should also insist on a solution.

Being critical for the sake of being critical does not make any sense and behove moneylife.
9 years ago
Flat Owners but not Adopted as members in a Co-Operative Housing society.

With due regards,

We, 316 members out of total 454 highly discouraged and most of us are senior- citizens of denial membership from Sri Ganesh co-operative Housing Society, Nerul, Navi Mumbai by the self appointed MC and behave like land mafias and adopted tactics to restraint from action taking authorities against its ulterior motives through lending multiple Vexatious cases in Bombay/HC instead of SC despite already decided case by the same HC in following manner.
(A) PIL-474-1996 then (B) WP- 5771/1997 and (C) SC/10922-98 and also settled by

Our request to your urgent intervene before matter goes very serious as ‘the said housing society committee may gear up for redevelopment on completing20/25years and to ‘save our right of ownership’ from a land mafias in a disguise of MC,


We are compelled to Pay our maintenance charges in the hands of self appointed MC and to defend by filing repeated petitions at Bombay HC as follow.

(A) Bombay HC (WP- 4481/2001) against scarping the order of JTR/CBD by the then
Minister (NCP). Based on the Hon’able HCs order, State Ministry issued final order
dated 25/08/2003 vide No- RVA 2702/CR-208/15-C, but the MC again approached
HC and got the STAY through WP-8508/2003

(B) again second time on the intervention of HC, contempt petition No-11/2011,
appointed administrator in 2012 and again concerned Minister (CONG.,) scarped the
order so again HC / WP (St) No 15277/2014 and

(C) recently our Co-operation Hon, minister Shri Chandrakant Patil (BJP) order
dated- 06/02/2015 vide No-RAV-2012/Pra.Kra.690/15C, and once again society MC in
HC with WP (St) No-8132/2015 saying authority is below power and do not come under the Jurisdiction of JTR as well Minister. Q/ now where to Go....

9 years ago
Banking on Aadhaar: What concerns the RBI? / What concerns an NOC from a co-operative housing society while each and every right posted in loan agreement while applicant takes loan against his Property.
Simple Indian
9 years ago
I can't understand the very concept of Aadhar Card as it's implemented now. Ironically, though it mentions that it does not prove citizenship, it is being pushed hard by governments so aggressively. So, one doesn't need to be a citizen of India to avail of welfare schemes - meant for Indian citizens ???? Strange the SC hasn't noted this glaring error in concept. Moreover, it has been reported that Aadhar Card is issued on fake documents easily, and even to Lord Hanuman, among other deities. With such disorganized way of implementation, I would suggest a few changes to this as below -

1. Make Aadhar enrolment truly voluntary, and against payment of standard fee of say, Rs. 100, and issue a fool-proof chip-based SmartCard to ONLY Indian citizens.
2. Make Aadhar enrolment only through govt offices, not through outsourced agencies / companies.
3. Make certain details editable by Aadhar allotee, such as mobile no, address - recently done by UIDAI, though not publicised well. This will immensely help huge migrant population in cities who often relocate even within a city from one rented house to another. Will save them a trip to Aadhar Enrolment Centre just to get mobile no &/ address updated.
4. Stop the current practice of sending Aadhar Letter through normal post, which often gets lost in transit, dumped by postmen, or misplaced during transit. Instead, Aadhar should be a chip-based Smartcard, from which information should be accessible only with the consent of Allottee (say, a secret PIN No) to prevent unauthorized data access or misuse by unscrupulous persons.
Only if Aadhar data is sanitized and provided to people on cost (in Smartcard form) will they value it, and govt can legitimately use it for many purposes, like preventing pilferage from PDS, other welfare schemes like NREGA, health schemes, etc.
Replied to Simple Indian comment 9 years ago
Govt is on right track in issuing ID to citizens. there are 1,200,000,000 verification to be done it started as only project for bonafied citizen it may take few decades and lakh cr of money. UID started simplest easiest foolproof method to enroll people. Later stage wise Grading will happen.
Avinash Murkute
9 years ago
Those who are pro AADHAR, here are the examples - How LPG subsidy was misused by AADHAR. Those who use less number of cylinders in a year (say 3-5), their LPG accounts were transferred subsidy, although they may not have consumed the cylinders. Then such cylinders booked in the name of such consumers were sold in the market by Gas agencies and their workers at a BLACK price. So, what is the use of such AADHAR which provides an opportunity for corruption. Few more questions to PRO AADHARAITES. (a) Will AADHAR give me drinking water (b) Will AADHAR give electricity (c) Will AADHAR give me low priced shelter (d) Will AADHAR gives roads to my villages (e) Will AADHAR account black money in India (f) Will AADHAR stop black money and bribes in India, if any of the answer is YES, please educate me. If someone thinks that technology can control all (for his personal gains) then it is a big HA HA HA.
Replied to Avinash Murkute comment 9 years ago
LPG subsidy goes to bank account, without connivance of user it cannot black marketed. but it is only few incidence compared to earlier. there is no best solution than this. If people willing to be part of looter nothing no system will help. it is like mother herself taking abortion pill.
Replied to Avinash Murkute comment 9 years ago
Dear Avinash, By making transfer of direct subsidy in account of Adhara holder, Govt is not paying any subsidy on cylinders sold by Gas agencies and their workers out of tern. On rest of the points not only Adhara No, applicable to so many others. It only reflects yours intelligency.
Ravindra Shetye
Replied to Avinash Murkute comment 9 years ago
Like Aadhar any ID facility can be misused. Ration Card was an example, but Govt could not cancel ALL ration cards because it would have created a bigger mess. PASSPORTS are sometinmes misused or there are cases on multiple passports to the same person. PASSPORTS as a system cannot be cancelled just because some people misuse it. In THIS world, anything, not only Aadhar Card is to be considered after weighing ADVANTAGES against DISADVANTAGES or MISUSE.
Avinash Murkute
Replied to Ravindra Shetye comment 9 years ago
Ration cards are issued under the stipulated Acts. Passports are issued u/the Act. Income tax refunds are issued under the Act. Company incorporation is done under the Companies Act. Under what AADHAR is issued? 2 plus 2 equals to four and not eight as understood by some AADHARITES.
Replied to Avinash Murkute comment 9 years ago
post Modi India govt was almost of corrupt by corrupts for corrupts. So lawmakers are big hurdle in enacting Aadhar act. People behind Anti-Aadhar agitation are beneficiary of Corruptions and their number and clout is immense.
Meenal Mamdani
9 years ago
I don't understand the apprehension regarding AADHAR.
Many countries in Asia, Africa and Latin America have a similar number, unique to that individual, to link all transactions, financial or otherwise, that are transacted by that individual. This number is assigned at birth or when the person reaches adulthood, 16 - 18 years.
In India, even now, birth is often not registered so assigning a number linked to a birth certificate is not possible. Similarly with internal migration due to poverty being common, it is difficult to assign a number linked to attendance at school etc is problematic. So a biometric identification is a compromise solution.
Hopefully once the entire country is covered by AADHAR, other identification numbers like PAN will be unnecessary.
9 years ago
The above article has not pointed the weaknesses or limitations of the AADHAR. It would have been better had it brought out how the implementation of AADHAR is detrimental to economy / safety & security.

We need to think of the masses who are denied opening of Bank a/cs. What is the better alternative for Direct Money (subsidy) transfer other than AADHAR? ARTICLE IS SILENT ON THESE ISSUES. While criticising you should suggest some better alternative. Why PAN / Election Cards could not be issues to all the citizens and made them mandatory for all ebnefits till now?
9 years ago
The writer didn't clearly state how money can be laundered? More important is writer is concerned about is private entity generating AADHAAR IDs.Ignorance about Aadhaar is very glaringly clear and I feel it is as equal to the movement of 1980s against computer in governance and banking by commies. commies made us believe that each computer will replace 5-10 clerks and there will be employment, as we NOW know it is big Ha Ha.

Aadhaar is not issued by private entities but it is generated Using UID servers. Identity issued is unique and it is process of establishing identity of man in foolproof manner using biological markings unique to him in trillions of populations. Opening (shell?) account is possible but it is connected to a man and there is no escape at all wherever he go whatever he do he simply cannot disappear.
shell account is just myth, it will lead to a person at any cost and he is accountable whaterer may be his sex(change) name(change) appearance(change). I think writer is now understood little and not spread roamers onwards to scare people?
MG Warrier
9 years ago
In my article posted here on January 7, 2013 captioned “Will the “Direct Cash Transfer” scheme benefit the common man?” and in an earlier article, I had expressed apprehensions about the utility and future of AADHAAR. No, I am not suggesting abandoning the idea at this late hour. Apex Court is examining the whole issue and a discussion on the subject may not be in order now. If one is permitted to make a suggestion, I would submit that AADHAAR concept should be demystified. If it has to serve as ‘Universal’ (U now stands for UNIQUE) identity card, the base information collected and used should relate to those any individual would like to make public. Like, (a) Name and parents’ name/s (b) Address (c) Normal place of residence and (d) Occupation. Instead of insisting on, such an identity card should be accepted by service providers like banks in lieu of other documents giving the same information. My personal experience some time back was a delivery agent of the postal department refused to accept AADHAAR card as identity proof for delivering a speed-post article in Trivandrum.
9 years ago
God knows how suddenly BJP Govt has changed its stance on Aadhar Card,without bothering about the resolving the issues raised by everyone(Including Moneylife).Even today the colleges are asking this no. from students & under fear of not getting exam tickets in future,students pressurize the parents to get Aadhar Card .We had word with college authorities & they in turn says ,What can we do ,govt is asking us to get.Even the Election office guys came to our society & ask everyone to give Aadhar Card No,else says you want be able to vote in next elections.On asking their seniors,they says what can do?we are being pressurize by our seniors.The whole thing is really murky.
Replied to Hemant comment 9 years ago
Simple to understand and remove skepticism is to take out govt and nationality but as human being. Aadhaar is identity (forget who gives) of human ( at present people in India) by marking (biometric)which is unique to him unaffected by mistakes in card. The man himself ID and taged with UID number. On this foundation any service, Governance can be build.
Vijay Chandar
9 years ago
I am not clear about the additional risks associated with ABPS as compared to ECS and RTGS. Both of them ultimately depend on an underlying bank account. We have to assume that the bank accounts are properly vetted for KYC and the transactions on the accounts are closely monitored for illegal movements.
9 years ago
Initially, Aadhar was introduced, inter alia, to facilitate ease of money laundering, terrorism and easy citizenship for Islamic "refugees" (as came to light in the North East) Or, so it would seem. Meanwhile, as in cases from Speed Bumps to Aazan (Noise Pollution) the Executive Branch and its cronies is in no mood to take the Supreme Court seriously. But the Supreme Court might be comforted as its own High Courts treat it as a sort of "Old Moses" just as the Supreme Court does in upholding the rule of law in appeals before it.
Ravindra Shetye
9 years ago
The Supreme Court order is rather naive, tp be very polite. All Advanced countries have a similar card like Aadhar Card which provides all information about the person and also can be used as an AUTHENTIC ID of the person anywhere, leave alone the Banks. If at all any shortcomings in Aadhar need to be corrected after studying the ID Card systems in Germany and USA.
Replied to Ravindra Shetye comment 9 years ago
Naive by choice given to understand How corrupt judiciary is in India. It is Mother of corruption in India.
Ravindra Shetye
9 years ago
The Supreme Court order is rather naive, tp be very polite. All Advanced countries have a similar card like Aadhar Card which provides all information about the person and also can be used as an AUTHENTIC ID of the person anywhere, leave alone the Banks. If at all any shortcomings in Aadhar need to be corrected after studying the ID Card systems in Germany and USA.
Ravindra Shetye
9 years ago
The Supreme Court order is rather naive, tp be very polite. All Advanced countries have a similar card like Aadhar Card which provides all information about the person and also can be used as an AUTHENTIC ID of the person anywhere, leave alone the Banks. If at all any shortcomings in Aadhar need to be corrected after studying the ID Card systems in Germany and USA.
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