Brokerages are awaiting operational clarity on the use of Aadhaar for Know Your Client (KYC) purposes for signing up clients faster.
They earlier used the Aadhaar database to complete the KYC process online. Industry officials said that the on-boarding process became considerably longer after the 2018 Supreme Court judgment that stopped the use of Aadhaar numbers by companies and private entities.
If the online process is put in place once again, as the market regulator — the Securities and Exchange Board of India (Sebi) — has attempted to do following a central government circular; customer acquisition will become faster, they said.
"A customer can be brought on board in as little as 15 minutes once this is in place," said Jimeet Modi, founder and chief executive officer, Samco Securities.
Satish Menon, executive director at Geojit Financial Services, said: "Currently, the KYC process is offline. If we are allowed online KYC through Aadhaar again, the process will become much smoother."
According to a source, online KYC through Aadhaar may be allowed in a month.
Sebi had issued a circular on November 5, laying down the framework for electronic KYC (e-KYC) through Aadhaar. It had said that this could be done through the use of a KYC user agency (KUA) which involved registration with the Unique Identification Authority of India (UIDAI).
“The Sebi-registered intermediaries/mutual fund distributors, who want to undertake Aadhaar authentication services through KUAs, shall enter into an agreement with any one KUA and get themselves registered with the UIDAI as sub-KUAs… Upon notification by the central government/registration with the UIDAI, KUAs and sub-KUAs shall adopt… (a defined process for) Aadhaar e-KYC of investors (resident) in the securities market,” the circular had said.
Another broking source said that there is some ambiguity over the use of Aadhaar despite the recent moves and further clarity may help reduce the time taken in processing client issues.
The abrupt stopping of Aadhaar-based e-KYC and the subsequent government moves have resulted in lack of clarity over the use of data garnered under the old system. There is also no clear timeline available on when the final framework with authenticated KUAs will be in place.
Another form of Aadhaar authentication used by the brokerage industry, eSign, was abruptly stopped last week, according to reports.
A source, who had received a notification for the same, said that brokerages have subsequently been told that services had resumed.
A broking industry source stated that the use of faster onboarding could also help firms lap up clients stranded by Karvy Stock Broking’s suspension from the stock exchanges following improper use of client assets. Karvy had over 282,000 active clients as of November, according to the exchange data.
An e-mail sent to Sebi, Karvy, and others did not immediately receive a reply.