Ministry of Electronics and Information Technology (MeitY) has apprised that “The Aadhaar and Other Laws (Amendment) Bill, 2019” has been passed by the Parliament.  The bill, inter-alia, has the  provision for allowing the use of Aadhaar authentication on voluntary basis as acceptable Know Your Customer (KYC) document, by inserting Section 11A under the Prevention of Money Laundering Act, 2002.           

Further, as per Reserve Bank of India (RBI’s) Master Direction on KYC dated 25.2.2016 (as amended in May 2019), banks are to obtain the Aadhaar number from an individual who is desirous of receiving any benefit or subsidy under any scheme notified under section 7 of the Aadhaar (Targeted Delivery of Financial and Other subsidies, Benefits and Services) Act, 2016 (18 of 2016).

As far as the requirement of Aadhaar number for receipt of certain subsidies, benefits and services etc. are concerned, Section 7 of The Aadhaar (Targeted Delivery of Financial and Other subsidies, Benefits and Services) Act, 2016 (18 of 2016), inter-alia, provides that:

“The Central Government or, as the case may be, the State Government may, for the purpose of establishing identity of an individual as a condition for receipt of a subsidy, benefit or service for which the expenditure is incurred from, or the receipt therefrom forms part of, the Consolidated Fund of India, require that such individual undergo authentication, or furnish proof of possession of Aadhaar number or in the case of an individual to whom no Aadhaar number has been assigned, such individual makes an application for enrolment:

 Provided that if an Aadhaar number is not assigned to an individual, the individual shall be offered alternate and viable means of identification for delivery of the subsidy, benefit or service.”

The linking of the bank accounts with Aadhaar for receiving subsidy/direct benefit transfers from the Government, including the State Governments is done as per the extant provisions of the Aadhaar (Targeted Delivery of Financial and Other subsidies, Benefits and Services) Act, 2016 (18 of 2016).

This was stated by Shri Anurag Singh Thakur, Minister of State for Finance & Corporate Affairs in a written reply to a question in Lok Sabha today.

Aadhaar authentication as voluntary KYC permits account linking for benefit transfers while ensuring alternate identification options. Seeding and linking of bank accounts with Aadhaar permits Aadhaar authentication to serve as a voluntary KYC mechanism under amended anti money laundering provisions, while banking KYC directions require collection of Aadhaar numbers from individuals seeking government benefits. For subsidies funded from the Consolidated Fund, the law allows authentication or proof of Aadhaar as a condition for delivery but requires offering alternate and viable means of identification where no Aadhaar number exists; account linking for direct benefit transfers follows the existing Aadhaar statute and regulatory directions.