Is Aadhaar enough?

Last week, the Supreme Court directed that an Aadhaar ( the unique citizen identification) card not be mandatory for direct benefit transfers such as a cooking gas subsidy or distribution of foodgrain; however, it can be used as one of the proofs.

At the same time, this year onwards the income tax department has said, if the Aadhaar number is linked to the PAN number, taxpayers need not send their physical I- T return forms to the processing centre. The Aadhaar number is sufficient verification.

Why the confusion regarding Aadhaar? Why is it allowed for some financial transactions but not for others? For instance, if you want to open a bank account, buy an insurance policy or invest in mutual funds, it it technically possible to do it with only your Aadhaar card. All regulators — Reserve Bank of India, Securities and Exchange Board of India ( Sebi) and Insurance and Regulatory Development Authority of India ( Irdai) – have said the Aadhaar card is sufficient as proof of both identity and address.

Yet, at the ground level, most institutions ask for additional documents. A bank may ask you for utility bills of the past three months, as proof of residence. This is to prove the customer has not changed house, says Jairam Sreedharan, president, Axis Bank. “ The Aadhaar card is not very common, yet. That is why we ask for other proof. But, it is possible to open a bank account with only an Aadhaar card,” he says. Only recently has the government enabled the feature to change the address on the Aadhaar card.

Life insurance companies may ask for the PAN card, as it is the standard proof of age. Here, age of the buyer is very important, since it is linked to the premium on the policy. But, after Irdai’s guideline, insurance companies are working on accepting Aadhaar as standard age proof, says an official from a private life insurance company.

For any Sebi or exchange- related transaction, aPAN is mandatory as proof, from the uniqueness point of view. Another advantage of PAN is that it is easy for the I- T department to identity customers. So, if Aadhaar has to be made the mandatory proof, it will require a lot of changes at the back- end, says Prasannan Keshavan, operations head, ICICI Securities.

Yet, given the database of Aadhaar, it is probably only a matter of time before it becomes widely accepted. “ The PAN database is about 150 million. The passport database is 60- 70 million.

So, Aadhaar has a much wider coverage,” adds Keshavan.

At a recent mutual fund event, Nimesh Shah, managing director, ICICI Prudential Asset Management Company, said the KYC ( Know Your Customer) norms for in- person verification were cumbersome and needed to be made simpler. His suggestion was to integrate Aadhaar into the KYC process. “ Aadhaar has already done in- person verification. So, if we integrate Aadhaar, we can widen our customer base,” he said.

Some practical problems with Aadhaar are unclear photographs and smudged signatures.

This makes it difficult for financial institutions to digitise documents presented as proof for future use. “ Today, we accept the Aadhaar card for bank accounts. But, for demat and trading accounts we also ask for PAN and other proof and photo identity, due to the practical problems. There are also issues like multiple Aadhaar cards having the same address, similar to the ration card,” says Jyoteesh Kumar, · head of marketing at HDFC Securities.

Even so, Aadhaar will in due course become the number one document because more fields can be accessed using that number, as compared to the PAN number. “ When we move towards unified KYC across all financial transactions and more details get captured into the system, it will get cleaned up. Then, Aadhaar will become the main number,” Kumar says.

Most experts believe it is only a matter of time before Aadhaar becomes the one- point document for all proof of identity.

The biggest benefit of Aadhaar has been in reducing the cases of bogus identity documents and reducing of duplication, says N C Saxena, former member of the National Advisory Council. “ Earlier, people needed 20 different documents for one task. Now, that is not the case. It is true that for different purposes, different documents are required, but that depends on the nature of the service. For poor people who dont have a driver’s license or passport, Aadhaar is the one point document,” he says.

Other than direct benefits, Aadhaar is also used for pension, scholarships, kisan card services, etc.

The main problem is how to make Aadhaar viable. For instance, using Aadhaar, about 170 million Jan Dhan accounts have been opened. But, very few of these are active or have money. These are only paper achievements, says Saxena.

Aadhaar is essential because other instruments like ration cards have not served the purpose of establishing a unique identity, says Ashvin Parekh, of Ashvin Parekh Advisory Services. With the Supreme Court saying Aadhaar is not the only mandatory proof, some action might be required by the Parliament.

“If banks insist on other proof, it is to protect themselves from any risk that could arise in future. But, that does not in any way undermine Aadhaars validity,” he says.

HOW TO ENROL FOR AADHAAR CARD

• Enrolling for Aadhaar is free
• Go to any authorised Aadhaar enrollment centre in India with your identity and address proof
• Check enrolment centres close to your residence on the UIDAI website. You can also request for an appointment to visit the centre, on the website
• UIDAI accepts any of 18 documents as proof of identity and 33 as proof of address
• At the enrolment centre, fill your personal details in the form. Your photo, finger- prints and iris scan will also be taken
• You can review the details and make any changes at the centre itself
• Once your application is successful, an Aadhaar number will be generated and mailed to your address. This could take up to three months
• Sharing of bank accounts is voluntary, not mandatory

Business Standard, New Delhi, 24th August 2015