RBI, Centre working on way to allow NBFCs to conduct e-KYC: Report

The Reserve Bank of India (RBI) and the Centre are working on a way to allow non-bank entities to conduct digital authentication of customers. At present, only banks are allowed to conduct customer identification using Aadhaar.

Allowing more entities to do so would help reach a wider population, sources told The Economic Times. But the Centre has been hesitant to give non-banking finance companies (NBFCs) access to UIDAI’s Aadhaar database due to prior complaints of misuse.

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Moneycontrol could not independently verify the report.

One of the sources said that providing access through a third-party like the National Payments Corporation of India (NPCI) could help prevent misuse and money laundering.

Notably, the Supreme Court had barred NBFCs from using Aadhaar for customer authentication purpose. This move would thus be significant as the COVID-29 pandemic has forced businesses online and social distancing norms are likely to be in place for the foreseeable future.

P Satish, Executive Director of Sa-Dhan, which is a microfinance institution (MFI), told the paper they requested that Section 11A of the Prevention of Money Laundering Act (PMLA) be invoked as it permits NBFCs the access to Aadhaar for authentication purposes since lack of e-KYC could adversely affect clients and MFIs.

“As NBFC-MFIs and MFIs were disallowed from using e-KYC, the microfinance sector and its clients have been facing a lot of issues. The RBI’s response has been positive. It is understood that they are already in touch with the government on this matter," he said.