NBFCs Will be Allowed to Use Aadhaar-based KYC to Offer Loans
The non-banking financial companies will be allowed to use the Aadhaar based identification for an institutional loan going forward. It will avoid the process of repetition for the customers as announced by the Finance Minister of India Nirmala Sitharaman.
The announcement related to the use of Aadhaar-based KYC by the non-banking financial companies is a good thing for the customers along with the companies. It will save time, expenses, and speedup up the process of loan.
The key takeaways from the FM press meet include:
- NBFCs to be given the permission to use the Aadhaar authenticated bank KYC for any type of loans inorder to avoid the unnecessary repetition of the verification process
- Essential amendment will be made in Aadhaar regulation along with PMLA (Prevention of Money Laundering Act) rules related to digital KYC.
- Initiative to speedup the tracked onboarding of customers.
When KYC of a customer is done at the bank, then there is no need to go through the process of KYC again while applying for any type of loan with Non-Banking Financial Companies (NBFCs). It is quite convenient for customers. In the present days, it is required to complete the process of KYC again and again with the various financial institutions making the process unnecessarily cumbersome. The process of availing credit will also be simplified and done quickly. So, NBFCs are permitted to use Aadhaar authenticated bank Know Your Customer (KYC) to save time and stay away from repetition.
Under the Prevention of Money-laundering Act, 2005 (PMLA), the changes in rules and regulations can be made in Aadhaar regulations. It will become easier now because electronic documents from Government DigiLocker will be accepted as per the provisions.
Further, there is a master amendment in the direction of the KYC along with updated documents as well as a list of documents that are eligible for identification, as introduced by the Reserve Bank of India.
Some major highlights are:
- NBFCs and banks will be able to gather data electronically using the various modes.
- The need of physical documents will be removed
- The Government of India’s Digi Locker can be used to access the customer electronic documents
On a voluntary basis, now customers can use Aadhaar number to abide with regulators by the norms of Know-Your-Customer (KYC). Some vital amendments were accordingly announced by the Reserve Bank of India regarding the KYC.
It becomes easy to understand the financial details of customers with the help of KYC details allow other entities such as financial institutions, Non-Banking Financial Companies, payment system providers, instrument issuers as well as agents of Money Transfer Service Scheme to take better decision about a customer. It also helps to make financial deals better and the risk of finance will also be managed by the said steps.
The declaration of Aadhar and amendments in other laws were done by the Union Cabinet in February 2019. It enables use of a twelve-digit number of Aadhar as a proof of identity for opening a bank account or taking a new phone connection. The person, under the age of 18, is not considered under this programme of Aadhaar.
Firstly, issued in the second half of the year 2012, the norms were only applicable to the first time account holder initially. Under Direct Benefit Transfer (DBT), the customers who want to receive the benefit or subsidy, the Aadhaar of that customer and KYC authentication should be obtained by the bank for the purpose of identification. The certified copy of any officially valid documents (OVD) including the details of the customers along with the address and one passport size photographs has to be obtained by the regulated entities under the beneficiary customers of non-DBT.
Read More : Aadhar Card & It’s Importance
