RBI to allow NBFCs apply for Aadhaar-e-KYC Authentication Licence

The NBFCs and payment service providers can now apply for obtaining Aadhaar e-KYC Authentication Licence as per RBI’s decision. This move is expected to boost digitisation and check frauds. “NBFCs, payment system providers and payment system participants who want to obtain Aadhaar Authentication License – KYC User Agency (KUA) License or sub-KUA License, will be required to submit their application to the central bank for onward submission to Unique Identification Authority of India (UIDAI),” said RBI. Ankit Bhatnagar, head of product, Mswipe said this step is important in trust building among customers as it will allow only licensed entities to conduct eKYC.

Bhatnagar said that non-banking entities providing financial services can better compliance with eKYC. It will also ensure that customer onboarding is offered directly through a KUA licence, for which they had to depend on third-party players. The process was cumbersome, as NBFCs were dependent on offline Aadhaar validation or paper-based authentication mechanisms like PAN verification. An online database can be used with the help of Aadhaar to make the identity verification process easy.

This will provide a seamless experience to customers as well as boost digitisation. It will also help in the fast delivery of financial products in the sector. Recently RBI has warned people against frauds that were happening in the name of KYC. It said not to share information, like account details or passwords with unidentified persons or agencies.

Arpit Ratan, co-founder and chief business officer, Signzy, said, “Given that RBI has lately been warning of frauds owing to improper KYC processes, providing a KUA license will definitely stem such activities and increase customers’ trust in non-banking entities which are working hard towards offering affordable and accessible financial services on the go.”