The Finance Minister said that many people who came for consultation said what has been proved once is repeatedly asked by another agencies. Clearly, Aadhar can be authenticated by banks KYC and NBFCs need not ask and repeat the process.
She added, “Necessary changes have been made in Prevention of Money Laundering Act 2002 and Aadhar regulations have also been tweaked to address this concern.”
KYC processes are regulated under the PMLA rules under which banks, lenders, and telecom providers capture customer details before onboarding them to their respective platforms.
“A great move towards removal of multiple KYC authentication for consumers. However, we are waiting for an operational update on how this will work. RBI has already initiated step towards simplification of authentication process through NBFC-AA.This announcement along with NBFC-AA can resolve an old Indian problem of duplicate KYC authentication work.” said Bhavin Patel, Co-founder & CEO, LenDenClub.
Earlier this week, PMLA was amended to capture data electronically, which is said to be a game changing move. It also allows regulators like Reserve Bank of India to further issue guidelines on KYC, potentially around video KYC.
The amendment has further allowed for customer to opt e-KYC voluntarily, which was stopped after the Supreme Court judgement.
“Enabling Aadhar based KYC will help solving a major problem which NBFCs usually face while onboarding new customers.” said Abhishek Gandhi, Co-founder & CFO, RupeeCircle.
He adds, The customer on-boarding TAT would be significantly reduced and operational efficiency would increase. This step would also help in cutting unnecessary costs for KYC processes by nearly 95% and we are grateful that the Government has addressed this at the right time.
FinTech startups and NBFCs were raising concerns around KYC as the cost of onboarding was going up post the SC judgement, as the manual KYC was a cost and time laggard. Many startups had built their business models around digital onboading of customers.
The amendments made in PMLA have widened and added the scope of using electronic documents besides physical documents allowing regulated entities to capture customer details electronically or called as e-KYC. The transition towards paperless KYC will be a seamless experience for customers.