Aadhaar validation by private entities gets green signal

The Ministry of Electronics and Information Technology (MeitY) on Thursday proposed rules that will allow private entities to carry out Aadhaar authentication for ease of living as well as delivery of benefits, services, and subsidies offered by government departments.

At present, only government ministries and departments are allowed to undertake Aadhaar authentication in the interest of good governance, preventing leakage of public funds, enablement of innovation, and the spread of knowledge.

They can do so if they are legally permitted and the Unique Identification Authority of India (UIDAI) is satisfied that the requesting entity is compliant with the standards of privacy and security specified by regulations.

Similarly, private entities who desire to use Aadhaar authentication for good governance purposes will need to prepare a proposal to the central

government with justification for the purpose for which Aadhaar authentication is being sought. The government may then send it to UIDAI, which will inform the central government whether to allow Aadhaar authentication by the applicant entity or not.

The proposed amendments may allow private businesses to carry out Aadhaar authentication for purposes such as the usage of digital platforms to ensure good governance, prevention of dissipation of social welfare benefits, enablement of innovation, and the spread of knowledge.

MeitY has now proposed to amend the rules to allow private entities to use authentication for the purposes mentioned earlier on. The rule says such authentication should be done voluntarily.

The new draft rule has reignited the long-running debate about Aadhaar-based eKYC (know-your-customer) procedures in the country. According to the Supreme Court’s judgment on Aadhaar of September 2018, private companies were effectively banned from using the biometric authentication system of Aadhaar.

At the time, the verdict dealt a blow not only to telecommunication companies and banks but also to a host of new-age financial technology start-ups. However, regulators, including the Reserve Bank of India, came up with guidelines on mandatory eKYC by private players.

Although the government has extended the ambit of Aadhaar authentication for ease of living and innovation, policy advocacy groups have raised concerns about the possibility of misuse. The amendment may allow authentication by independent entities without the oversight of a sectoral regulator if they comply with the conditions.

“There are concerns with this amendment because the country does not have a law on data privacy. There are also concerns with respect to entities making authentication mandatory in practicality, even as the rule is limited to authentication on a voluntary basis,” said Amol Kulkarni, director (research), CUTS (Consumer Unity & Trust Society) International — a public advocacy group.

The Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits, and Services) Act, 2016, provides that entities may seek to perform Aadhaar authentication for a prescribed purpose.

The Good Governance (Social Welfare, Innovation, Knowledge) Rules, 2020, lay down such purposes for Aadhaar authentication.

According to official data, UIDAI records 70-80 million Aadhaar authentications every day. Over 1,000 direct benefit schemes — 720 from state governments and 318 from central government — use Aadhaar authentication services to avoid re-duplication and removal of ghost beneficiaries.

As of November 2022, multiple large central schemes, including PAHAL (Pratyaksh Hanstantrit Labh) and Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), have paid over Rs 7.66 trillion through 10.1 billion successful transactions.

The public distribution system accounts for 20 per cent of the total authentications; the telecommunications sector has a share of 6 per cent of it, while MGNREGS forms 2 per cent of authentications.

According to the proposed amendment, private entities upon permission from the government will be able to build platforms for facilitating these schemes.