Banks Can Continue With Aadhaar-Enabled Payment System: UIDAI

In line with Supreme Court’s verdict on Aadhaar in September 2018, the Unique Identification Authority of India (UIDAI) has told banks to continue with the Aadhaar-Enabled Payment System (AePS). The move came in after a few private banks suspend these services.

In September 2018, Supreme Court verdict stated that Aadhaar is mandatory only for filing income tax returns and for the allotment of PAN. It won’t be essential for opening bank accounts or getting SIM cards from telecom operators.

Thus, some lenders had suspended AePS operations setting aside mandatory linking of Aadhaar with bank accounts, under the state of confusion.

But UIDAI has now reiterated that direct benefit transfers (DBT) will continue to be Aadhaar-linked and thus banks can continue with the AePS facility.

“The AePS system ensures that the government benefits and subsidy money reach directly in beneficiaries’ hands and eliminates any diversion by ghosts and middlemen,” said UIDAI chief executive Ajay Bhushan Pandey.

Aadhaar Enabled Payment System: How It Works?

Aadhaar-Enabled Payment System is a system developed by the National Payments Corporation of India (NPCI) that allows people to carry out financial transactions on a Micro-ATM by furnishing just their Aadhaar number and verifying it with the help of their fingerprint/iris scan.

The only inputs required for a customer to do a transaction under this scenario are:-

• IIN (Identifying the Bank to which the customer is associated)
• Aadhaar Number
• Fingerprint captured during their enrollment

Most AePS transactions are made through either handheld devices provided by bank mitras or installed at public distribution system outlets. It offers services such as cash withdrawal, cash deposit, balance enquiry, aadhaar to aadhaar fund transfer, mini statement and best finger detection.

Current Status Of AePS Usage

Almost 140 Mn beneficiaries under the Pahal and Ujjwala schemes receive gas cylinder subsidies in their bank accounts every month. Out of 600K villages, only about 140K have bricks-and-mortar bank branches.

Beneficiaries of the rural jobs guarantee programme are able to withdraw wages in their villages through Aadhaar-enabled Payment System micro-ATMs.

Also, there is BHIM Aadhaar Pay, which is meant for merchants to receive digital payments from customers over the counter through Aadhaar authentication. It allows for any merchant associated with any acquiring bank on BHIM Aadhaar Pay service, to allow the merchant to accept payment from a customer of any bank, by authenticating the customer’s biometrics – currently only fingerprints, directly from the customer’s Aadhaar enabled bank account and receive the sale proceeds instantaneously directly into merchant’s own bank account.

According to reports, apart from being a payment platform, the government looking to use AEPS to generate demand for microloans as part of its financial inclusion outreach. Monthly AEPS transactions have risen tenfold to 124 Mn in June this year from 12 Mn in July 2016.

[The development was reported by ET.]