What does the Aadhaar verdict mean for investors? Here's a quick take

The five-judge bench of the Supreme Court gave a nuanced verdict on Aadhaar running into 1,400 pages. This judgement will change little on the ground for investors who are concerned about privacy issues. However, in theory, it allows for a somewhat greater degree of privacy. 

This is a quick analysis based on a scan of the judgement. Lawyers will have to dissect the 1400-odd pages to achieve clarity and we may well be wrong in our reading.  

Since I-T returns and PAN must be linked to the biometric ID, this means a one-to-one correspondence for every investor since PAN is mandatory for all KYC. However, it will not be necessary to link Aadhaar directly to trading accounts, or demat, or mutual fund folios or bank accounts. Indeed, the whole concept of e-KYC will have to revisited. 

It's unclear if a delinking mechanism will be provided, but that is logical since KYC for new accounts would not involve Aadhaar. It may be possible for an existing investor to delink Aadhaar and provide only PAN, for instance. It is also unclear if the Provident Fund will require Aadhaar – it is a service provided by a government organisation, after all, but an initial reading suggests Aadhaar may not be necessary for clients of government-owned banks and insurers and hence, it may not be required for PF. 

Taking Aadhaar linking off all sorts of private databases increases the safety factor to some extent. Assuming that data and metadata should be destroyed, the unique ID will also have less potentially damaging information associated with it. Hence, the chances of identity theft or leaks of private information are reduced.  However, state government organisations may still ask for Aadhaar and the security of those databases remains a matter of concern since there have been multiple leaks. The security of the motherlode, the UIDAI database, is of paramount importance and indeed, the I-T Dept would also have to ensure its data remains secure.

The dissenting opinion of Justice Chandrachud leaves the judgement open to future challenge on the grounds that it was unconstitutional to present it as a Money Bill bypassing the Rajya Sabha. The fact that several sections were struck down points to the fact that the drafting represented constitutional overreach. So, we may see further changes in the laws related to biometric ID. 

The author is an independent market analyst. The views are his own.