In the grand scheme of India’s central government’s drive for financial inclusion lies a distinctive 12-digit digital identification number known as Aadhaar. This number, introduced in 2009, stands as the world’s largest biometric identification system.
What is its purpose?
It is to authenticate and reach directly to Indian residents, providing them with subsidies, services, and benefits using nothing more than this unique 12-digit ID.
Originally created for disbursing social welfare schemes, Aadhaar has evolved into an instrument for accessing financial services. Banking accounts, remittances, credit, insurance, and pensions. Aadhaar’s reach extends across this spectrum. This transformation hinges on the foundation of the Aadhaar card, an identity touchstone for every Indian resident.
Let’s dive deep into the benefits that make Aadhaar a crucial thing in India’s financial landscape.
What Makes Aadhaar Useful For Financial Services?
There are numerous benefits of having an Aadhaar card, making it a highly preferred form of identification for the following reasons:
1. Aadhaar is KYC-compliant
Ever heard of KYC? It stands for “know-your-customer,” and Aadhaar ticks all the boxes. Submitting an Aadhaar card is recognized by the Reserve Bank of India (RBI) as an officially valid document (OVD). This puts it in the same league as other well-accepted IDs like passports, driver’s licenses, and voter’s identity cards. If an OVD presented for opening a bank account carries the necessary personal details and address, no additional documentation is needed. With Aadhaar encompassing both these aspects, it emerges as a solitary proof of identity.
2. Aadhaar is a Single Source of Verification
Aadhaar’s effortless verification process has captured the attention of financial institutions ranging from banks to insurance companies, and even stock brokerage firms. This number has become a key component for onboarding new customers and aiding the older generation’s transition into the digital era. Once enrolled, the Aadhaar number can be utilized multiple times to verify and establish one’s identity. This means individuals no longer have to keep producing various supporting documents each time they wish to access services, benefits, or subsidies.
3. Mobility and Accessibility
With its online authentication capability, Aadhaar accommodates the migratory nature of many Indians who move from one part of the country to another. By offering a portable identity that can be verified digitally, Aadhaar ensures seamless access to services for millions on the move.
Financial Areas Where We Use Aadhaar as a Main Entity
There are a lot of financial areas where we use Aadhaar as a main entity. Some of them are discussed below.
1. Banking
The process of opening a bank account has been streamlined with Aadhaar. Just provide your Aadhaar number, and you’re good to go, no need for additional IDs.
2. Insurance
While the Insurance Regulatory Authority of India (IRDAI) initially mandated Aadhaar for insurance policies, it later adopted a flexible stance. Aadhaar remains an option, not a necessity.
3. Loans Made Easier
Getting a personal loan has become easier than you think. It wasn’t always like this; in the past, the process required many documents. However, today, you can avail an Aadhaar card loan without the hassle.
4. Stock Markets
The Securities and Exchange Board of India (SEBI) has steered primary market entities like stock exchanges and depositories towards integrating Aadhaar for user verification. This has streamlined the process for those looking to participate in stock trading.
5. Micro, Small, and Medium Enterprises (MSME)
Aadhaar made its presence felt in the realm of small businesses. The government’s new rules for categorizing enterprises as MSMEs mandate an Aadhaar number for Udyam Registration.
6. Retirement Planning
Aadhaar’s influence extends to retirement funds. It simplifies the process of withdrawing, settling, and transferring provident fund claims online. The Universal Account Number (UAN), a constant across an employee’s life, links with Aadhaar to facilitate efficient access to funds.
7. Taxes and Income
The Income Tax Act’s Section 139AA necessitates Aadhaar cards or Aadhaar application form IDs for filing annual income tax. This step bolsters financial entities’ ability to validate income sources and gauge business stability using Aadhaar details.
8.DigiLocker
With Aadhaar-based profile management, data sharing from government entities continues, though private entities’ access may face limitations.
9. Virtual Identifier and e-vault
Investments in the secure storage of Aadhaar numbers are underway, particularly by global authentication user agencies (AUA). These investments are influenced by potential restrictions on private entities’ use of Aadhaar.
Conclusion
Aadhaar has evolved into a symbol of empowerment for millions of Indians. It bridges the gap between financial services and individuals, fostering a financially inclusive environment and embracing the digital age. This unique identifier has propelled India into an era of financial empowerment, where access to services isn’t just a luxury, but a right.