NPCI ask banks to stop Aadhaar-based payments through UPI and IMPS
Moneylife Digital Team 20 July 2018
The National Payments Corporation of India (NPCI) has asked banks to discontinue Aadhar-based payments through the Unified Payments Interface (UPI) and Immediate Payment System (IMPS) channels. Pay to Aadhaar is an additional functionality in UPI and IMPS where the payer can transfer funds to the beneficiary using Aadhaar number. Separately, NPCI also asked banks to stop giving cashbacks on using Bharat Interface for Money (BHIM) to all users, except new ones. 
 
Quoting a 17 July 2018 circular issued by NPCI to banks, a report from Financial Express says (https://www.financialexpress.com/money/discontinue-aadhaar-based-payments-through-upi-and-imps-npci-tells-banks/1251410/), “Aadhaar number is a sensitive information and the revised framework about its usage in the payment landscape is still evolving. With this background, we proposed removal of ‘Pay to Aadhaar’ functionality in both UPI and IMPS before the steering committee (meeting held on 5 July 2018). The proposal of removing the Aadhaar number functionality was approved by the steering committee.”
 
From 31 August 2018, the 'Pay to Aadhaar' function would be removed from both UPI and IMPS. “All member banks should remove this functionality both as remitter and beneficiary. Also, all interfaces currently offering this functionality, such as UPI apps and third-party apps, should remove this option from their respective apps by 31 August 2018,” the circular from NPCI says.
 
The steering committee for UPI and IMPS has 18 bank and non-bank payment players. This includes State Bank of India (SBI), HDFC Bank, Citibank, Maharashtra Gramin Bank, One Mobikwik Systems and Paytm Payments Bank, among others. 
 
In a separate circular, NPCI has asked banks to restrict cashbacks on using BHIM to new users only. In addition, it has removed incentives for merchants accepting UPI payments from 1 July 2018. 
 
In April 2018, the government launched a scheme entailing cashbacks of up to Rs750 per month for users of BHIM app. Merchants who accepted payments through any UPI app were entitled to a maximum cashback of Rs1,000 per month. They were entitled to receive a cashback worth 10% of the value of each transaction, subject to a cap of Rs50 per transaction.
 
In a notification dated 17 July 2018, NPCI said that following a review of the incentive scheme, the Ministry for Electronics and Information Technology (MeitY) has decided to scale it back significantly, another report from the newspaper says
 
For IMPS, there are 364 members banks while for UPI, there are 101 banks registered with NPCI. There are 53.17 crore Aadhaar numbers mapped in the NPCI's Aadhaar based payment system.
 
An Aadhaar number becomes a financial address when an Aadhaar is “seeded” into a table called the “NPCI mapper” by anyone linking the Aadhaar to a bank account. This mapper is a directory of Aadhaar numbers and Institution Identification Number (IIN) numbers used for the purpose of routing transactions to the destination banks. The IIN is a unique 6-digit number issued by NPCI to any participating bank. 
 
If you or anyone else link your Aadhaar with another bank account, the NPCI mapper is overwritten with the new banks’ IIN. Money transferred to an Aadhaar number using the AEPS gets transferred to the bank account linked to the Aadhaar number at the branch recognised by the IIN.
 
This idea of a mapper, as used by NPCI’s AEPS, does not allow for instructions from sender about the account to deposit money, but relies on periodic update of IIN in the NPCI’s table mapping Aadhaar numbers from banks. This mapping is volatile because multiple banks periodically update the Aadhaar numbers linked with accounts held by them. Neither the banks, the NPCI nor you have control on where you would like your payments to go.  
 
According to Dr Anupam Saraph, a renowned expert in governance of complex systems, money launderers exploit this volatility to make money transfers untraceable. "A money launderer can transfer money to an account linked to an alternate IIN and then re-seed the NPCI’s mapper with the original IIN for the Aadhaar number, completely wiping out any trace of money to the alternate IIN. Like transactions of bearer shares in Panama, such money transfers becomes no different from a hawala transaction between real parties who remain anonymous or benami."
Comments
Hemant Chitale
3 years ago
What is NPCI doing about the mapper ? Does it maintain a history of updates to the mapper ? Does it allow multiple bank accounts with priority levels / monetary limits to be associated with the same Aadhaar number ?
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