Can Aadhaar be used for quick, online KYC? Brokerages await clarity
Brokerages are awaiting operational clarity on the use of Aadhaar for know your client (KYC) purposes, to help sign up clients faster.
They earlier used the Aadhaar database to complete the KYC process online. Industry officials said that the on-boarding process became considerably longer after the 2018 Supreme Court judgement which stopped Aadhaar use by companies and private entities. If the online process is put in place once again, as the stock market regulator has attempted to do following a central government circular; then customer acquisition can become significantly faster, according to them.
"A customer can be brought on board in as little as 15 minutes once this is in place," according to Jimeet Modi, founder and chief executive officer at Samco Securities.
"Currently we are using offline KYC. If we are back to the use of online KYC through Aadhaar then it can make the process much smoother," said Satish Menon, Executive Director at Geojit Financial Services.
This may well come around in a month or so, according to a source.
The Securities and Exchange Board of India (Sebi) had issued a circular on November 5, 2019 laying out the framework for the using electronic KYC (e-KYC) through Aadhaar. It had said that this could be done through the use of a KYC user agency (KUA) which involved registration with the Unique Identification Authority of India (UIDAI), the authority for use of Aadhaar in India.
“The Sebi registered intermediaries/mutual fund distributors, who want to undertake Aadhaar authentication services through KUAs, shall enter into an agreement with any one KUA and get themselves registered with UIDAI as sub-KUAs…Upon notification by the Central Government/registration with UIDAI, the KUAs and sub-KUAs shall adopt ..(a defined process for)…Aadhaar e-KYC of investors (resident) in the securities market,” the circular had said.
- Use of Aadhaar for online KYC stopped
- Central government moves to restart use
- Sebi circular in November lays down procedures to follow
- May be operational soon
- Could help faster client onboarding
Another broking source said that there is some ambiguity which remains over the use of Aadhaar despite the recent moves, further clarity could help reduce the time further in processing client issues.
Another form of Aadhaar authentication used by the brokerage industry, eSign, was abruptly stopped last week, according to reports. A source who had received a notification for the same, said that they have subsequently been told that services had resumed. A broking industry source stated that the use of faster on-boarding could also help firms lap up clients stranded by Karvy Stock Broking’s suspension from stock exchanges following improper use of client assets. Karvy had over 282,000 active clients as of November, according to exchange data.
An email sent to Sebi, Karvy and others did not immediately receive a reply.