Aadhaar not enough to open bank accounts: RBI

Mumbai: After coming under fire for not living up to its intended purpose, the Unique Identification Authority of India (UIDAI) project has received one more blow. The Reserve Bank of India (RBI) while accepting the letter issued by Aadhaar (the name given to the UIDAI project) as an identity proof, has insisted on a separate address proof to open a bank account.
It was widely expected that once a citizen gets registered under Aadhaar, a bank account could be opened without any further proof of address or identity. Now with the RBI directive the Aadhaar number will only meet halfway the “know your customer” (KYC) norms of banks. Bankers say that while it is possible for the poor to produce proof of identity in the form of a voter ID card, it is the proof of address
that is a challenge since there are many who do not own a landline telephone or have any home ownership documents. Although India has a high mobile penetration, the majority of phones are pre-paid and customers therefore do not have bills to support address proof.
In a circular to banks on Wednesday, RBI said: “It is reiterated that while opening accounts based on Aadhaar also, banks must satisfy themselves about the current address of the customer by obtaining required proof of the same as per extant instructions”. The central bank has also decided to allow banks to use the UIDAI letter as proof of identity for opening all bank accounts and not just small “no frills” accounts as earlier envisaged.
One of the objectives of the UIADI was to serve as a single identification akin to the Social Security number in the United States which would be accepted as sufficient proof of identification. But since the UIDAI project also included biometric identification it was meant to be a foolproof identification.