Despite these obstacles, Aadhaar is now central to India’s public service delivery systems, and plays a crucial role in digital transactions through authentication services. It has created multiple digital artefacts, including eKYC, online digital signatures (eSign), DigiLocker and Consent artefacts.
Aadhaar has made great strides in streamlining processes by cleaning up databases, such as PAN and bank accounts. Its eKYC services have minimised costs and friction in transactions. JAM has enhanced financial inclusion and facilitated DBT on a massive scale, with 118 bn authentication transactions and 14 bn eKYC transactions recorded to date.
However, the scope of Aadhaar’s application has largely been confined to government programmes and specific sectors like banking and telecom. Its potential remains underutilised, particularly in private sector applications where Aadhaar-based authentication could provide benefits. For instance, companies involved in gold loans still rely on self-attested Aadhaar photocopies and other documents. This situation contradicts Aadhaar’s foundational purpose as a next-gen digital identity designed to usher in an era of paperless, presence-less governance.
The current trend of relying on self-attested Aadhaar documents is a regressive step, negating Aadhaar’s intent to eliminate paper, enhance trust and security, and reduce costs. Instead of leveraging Aadhaar’s digital capabilities, many entities still ask for physical copies of Aadhaar documents, which are vulnerable to fraud. For example, mobile SIM cards are sometimes acquired fraudulently using self-attested Aadhaar letters.
Though India lacks data on total KYC transactions, it’s estimated that Aadhaar transactions account for less than 10% of the total. With over 33 bn authentication and KYC transactions annually, the cost associated with paper-based KYC processes, including photocopying and document preservation, is substantial, not to mention the environmental impact.Is it necessary? Are there any real restrictions imposed by law or SC decision on Aadhaar to disallow citizens’ voluntary use of Aadhaar-based KYC? No. All that is required is to expand the ecosystem of the Aadhaar-based authentication system in the country.When the law relating to Aadhaar was amended in 2019, a new sub-section was inserted:
When the law relating to Aadhaar was amended in 2019, a new sub-section was inserted in Section 4(3) of the Aadhaar Act 2016: ‘Every Aadhaar number holder to establish his identity, may voluntarily use his Aadhaar number in physical or electronic form by way of authentication or offline verification, or in such other form as may be notified, in such manner as may be specified by regulations.’
It means that every Aadhaar holder has a right to establish his or her identity using the 12-digit unique identity number. However, there has to be arrangements on the side of the entity wishing ID verification to accept and use the authentication. This will require the entity to be Authentication User Agency (AUA)-licensed by UIDAI. If UIDAI is restrictive about issuing permission/licences, then there will be no way for citizens to exercise this right.
A key consideration is whether UIDAI has the capacity to handle increased loads of Aadhaar authentications. Currently, UIDAI processes an average of 91 mn authentication requests daily, and its infrastructure can manage up to 100 times this volume. So, there is no capacity constraint.
Expanding Aadhaar-based authentication could lead to significant cost savings and increased trust. Introduction of facial recognition tech eliminates the need for additional devices, as smartphones can now serve as authentication tools. To realise this potential, UIDAI needs to:
Adopt a more liberal approach in granting AUA and sub-AUA licences. Such a move would not compromise security or standards, but would enhance accessibility and utility of Aadhaar-based services.
A framework for sharing KYC information among financial institutions is needed. A centralised repository for digitally signed eKYC documents would allow citizens to grant permission to share their data across institutions, eliminating the need for repetitive KYC submissions. This would reduce inconvenience for individuals and cut costs for the system.
Previous governments have made significant strides in integrating Aadhaar into various services. The current one should build on this foundation by expanding Aadhaar’s use for voluntary ID authentication.
Aadhaar is now one of India’s most prominent DPI. India must fully leverage Aadhaar’s capabilities to maximise its benefits and integrate it more extensively into everyday transactions.
The writer is former DG and mission director, UIDAI