Cabinet Approves Aadhaar Amendment Bill to Allow Aadhaar-Based KYC

Cabinet Approves Aadhaar Amendment Bill to Allow Aadhaar-Based KYC

The Union Cabinet has approved the Aadhaar and Other Laws (Amendment) Bill, 2019, and will now be introduced in the first session of Parliament, set to begin on June 17th, for ratification by the Lok Sabha. The proposed amendments are the same as those contained in the ordinance circulated by the President in March this year. According to an official release by the government, the new proposals “would allow the use of Aadhaar number for authentication on voluntary basis as acceptable KYC (Know Your Customer) document under the Telegraph Act, 1885 and the Prevention of Money Laundering Act, 2002”. The Aadhaar and Other Laws (Amendment) Bill, 2018 was passed in the Lok Sabha in January this year. However, for it to become an Act, it needed further ratification in the Rajya Sabha – where it lapsed. Following that, the government issued an ordinance which contained the the same changes as proposed by the Aadhaar and Other Laws (Amendment Bill), 2018. The ordinance echoed the passing of Aadhaar as a money bill to bypass the Upper House of the Parliament.

Main Amendments from the Bill

Here are some of the important proposed changes in the current amendment:

1. Allows private bodies such as banks and telcos to use Aadhaar as one of the ‘know your customer’ (KYC) methods for authenticating users.

2. Interchangeable use of authentication and verification: While the original Aadhaar Act uses the term verification only twice, the amendment bill uses the term 31 times. Under the amendments, an entity can carry out authentication, provided they are compliant with the privacy and security regulations of the UIDAI. They can also be permitted to authenticate a user under the provisions of Parliamentary law or if the authentication is done in the “interest of the State.”

3. Alternative virtual identity: To conceal the actual Aadhaar number of an individual an alternative virtual identity will be created

4. A child Aadhaar card holder, within a period of six months of attaining 18 years of age, can make an application for cancellation of his Aadhaar number. Earlier a young adult did not have the provision of opting out.

5. Allows for voluntary use of Aadhaar number for KYC under the Telegraph Act and Prevention of Money Laundering Act. A user can voluntarily identify herself through one of these modes: Aadhaar authentication, offline verification, passport or any other officially valid document.

6. Abolishes Section 57 of the Aadhaar Act. The bill proposed to do away with section 57 which allowed private entities to collect Aadhaar data of individuals.

7. No one can be denied services if they refuse, or are unable to undergo authentication.

8. The amendment provides for establishment of the UIDAI Fund 

9. It lays out a mechanism for penalty for failure to comply with the provisions of the Act, such as appointment of an adjudicating officer, punishment for up to 3 years for violations, and also allows the Aadhaar number holder to file a complaint.

Understanding some of the proposed amendments

Now that the ruling government has a two-thirds majority in the Lok Sabha, the Bill is likely to pass with no formal resistance. However, the proposed amendments in the bill will have certain ramifications going forward:

First, these amendments give unprecedented superiority to the UIDAI over banks, who have previously complained of receiving orders from the UIDAI. Under the Banking Regulation Act, only the RBI and Department of Financial Services (DFS) are mandated to issue orders to banks.

While the Bill allows children to opt out of the Aadhaar ecosystem once they turn 18, there is no clear direction on what happens to children who were enrolled before the Aadhaar Act came into place.

The proposals call for an alternate virtual identity of an individual, in case he/she fails to get an Aadhaar card due to any given reason. Since a lot of welfare schemes today make use of the Aadhaar card, the provision of recognising an alternate identity is a welcome move. This will ensure that people who don’t have an Aadhaar card will not miss out on government’s welfare plans.

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