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Indian Banks’ Association Questions UIDAI’s Jurisdiction

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| October 21 , 2017 , 11:48 IST

The Indian Banks’ Association (IBA) has questioned the jurisdiction of the Unique Identification Authority of India (UIDAI) in issuing directions to banks under the Aadhaar Act, according to news reports.

As per reports IBA has written to the ministry of electronics and information technology, the Reserve Bank of India (RBI) and the finance ministry’s department of financial services (DFS), arguing that under the Banking Regulation Act only RBI has the mandate to issue directives to banks.

The IBA letter also raises issues involved in banks creating an Aadhaar database and using it for KYC purposes, according to the reports.

UIDAI had in July, asked banks to open Aadhaar enrolment and updating facilities in at least one-tenth of their branches by the end of August.

UIDAI made it mandatory for banks to act as both the Aadhaar registrar and enrolment agency. It also extended the deadline for banks to open Aadhaar enrolment and updation centres in at least 10 per cent or over 15,000 of their branches twice. October 31 is the new deadline unless it is extended. According to UIDAI Banks without Aadhaar enrolment centres in 10 per cent of their branches will face Rs 20,000 fine (per uncovered branch) after October 31. 
The UIDAI circular also states that the enrolment centres shall be operated by banks directly inside bank branches without involvement of any private Aadhaar enrolment agencies. Banks had already appointed external agencies for enrolment.

In another twist to this saga, RBI has in response to an RTI filed by a financial journalist Yogesh Sapkale stated that it had not issued any order to banks asking them to go on an aadhar linkage overdrive.

Responding to a specific query on providing copy of the file along with file notings regarding mandatory linking of Aadhaar number with bank accounts, the Reserve Bank stated it “has not issued any instruction so far regarding mandatory liking of Aadhaar number with bank accounts."

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The government had amended the Prevention of Money Laundering (Maintenance of Records) Rules, 2005, requiring Aadhaar to be linked to every bank account by 31 December, failing which the accounts will become inoperative.

On 14 October, a fresh petition was filed in Supreme Court challenging the government’s decision to link bank accounts and mobile phones to the 12-digit unique identity number issued by UIDAI.