Rupeeiq.com : Supreme Court Verdict On Aadhaar: What It Means For Your Money
It is no longer mandatory to provide your Aadhaar while opening a bank account, nor needed for your phone connections and school admissions.
The Supreme Court has upheld the constitutional validity of Aadhaar while striking down and reading certain sections of the Aadhaar Act 2016. In the 1448-page judgement, the 5-member bench – with one dissenting judge – looked at the various aspects of Aadhaar keeping in mind the empowerment of the public at large and focussing on plugging the loopholes.
The majority judgment was authored by Justice AK Sikri (which has the concurrence of Chief Justice Dipak Misra and Justice AM Khanwilkar) and Justice Ashok Bhushan. The lone dissenting judgment was of Justice D Y Chandrachud.
No linking with bank accounts
According to the landmark verdict pronounced today, it is no longer mandatory to provide your Aadhaar while opening a bank account. The majority judgement struck down Rule 9 of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005, which insisted that bank accounts should be linked with Aadhaar. It was held that the provision did not meet the test of proportionality and, therefore, violated the right to privacy of a person which extends to banking details, as per a report in LiveLaw.
However, the court has upheld its earlier decision that it’s mandatory to link Aadhaar with PAN (permanent account number) as per the 139AA of the Income Tax Act.
The other major component of today’s judgement is that it is not required to link your telephone numbers with your Aadhaar number. The court has quashed the circular dated March 23, 2017 issued by the Department of Telecommunications mandating linking of mobile number with Aadhaar. This circular was held illegal and unconstitutional, as per the judgement.
What happens to existing KYC
There are still clarifications needed to figure out the exact impact of the judgement on the existing eKYC processes for opening a bank account, says Adhil Shetty, CEO, BankBazaar.com. Aadhaar would continue to be recognized as an identity and address proof and with the amendment of the PMLA again it would be recognized as an ‘Officially Valid Document’, he added.
Bankbazaar said the consent-based architecture is in place and voluntary submission of Aadhaar by customers would continue.
While the judgement has struck down Section 57, which allowed sharing of Aadhaardata with private entities, it’s not clear how this will impact eKYC processes. “We are now studying what will change when it comes to authenticating customers during opening an account based relationship with the bank,” said Shetty.
It remains to be seen as to how the RBI restructures the CDD (customer due-diligence) procedure in the wake of this judgment.
Data misuse loophole closed
Neel Ratan, partner & leader, government & public sector, PwC India feels that this judgement will help minimise the uncertainties regarding Aadhaar usage considerably. “It provides reasonable restrictions to ensure citizen consent is taken and misuse of data can be controlled, while benefits of Aadhaar can be adequately passed on to marginalised groups,” Ratan pointed out.
Ramesh Mamgain, area vice president, India and SAARC region, Commvault, said the Supreme Court of India has made the right decision by de-linking Aadhaar data from mobile phone and bank accounts. This will go a long way in protecting user data and ensuring that there are fewer risks in data leakages. “However, private enterprises will need to get their act together quickly to migrate to GDPR norms and ensure that secondary data is managed securely across locations,” he added.
There have been many questions regarding the data security, the surveillance state, privacy problem etc. and with today’s verdict, the air is now clear around those concerns. “However, the Supreme Court highlighted some of the flaws in Aadhaar law due to which private companies have been barred from using Aadhaar for identity verification. This may affect the fintech as well as other financial companies which uses only Aadhaar as their identity verification mechanism,” said Bhavin Patel, co-founder, and CEO, LenDenClub.
He was quick to add that though the verdict is not affecting LenDenClub, this will be a regressive move for fintech companies as they will eventually move to the traditional mode of verifying individuals, thereby the turnaround time for processing the loan will increase to a considerable extent, said Patel.
Gopal Bohra, Partner, N.A Shah Associates LLP, said the apex court has applied balanced approach making mandatory use of Aadhaar at certain places such as filing of income tax return at least for those individuals who are eligible to obtain Aadhaar number and also restricting the data sharing with private parties.
Aadhaar not required for school admission, CBSE
The SC judgement also ruled that Aadhaar cannot be made mandatory for CBSE, NEET, JEE, and UGC and also for school admission, exam registration etc., as such services are not within the scope of Section 7 of the Aadhaar Act.