‘Exorbitant’ authentication licence fees hurt smaller banks

Bankers have questioned the “exorbitant” charges prescribed by the Unique Identification Authority of India (UIDAI) for Aadhaar authentication services. Calling for a review of the charges, banks have warned that smaller lenders may have no option but to shift the burden to customers.

Few branches

In a missive sent late last month to the UIDAI, the Maharashtra Urban Co-operative Banks Federation said it had been flooded with complaints from banks expressing concern over the charges, which were ‘not affordable’ for a majority of its members.

“Most of the non-scheduled UCBs are unit banks or have less than five branches. UCBs with a customer base of five crore are meeting the credit needs of poor and marginal sections of the society at the rural level and playing an unique and efficient role in financial inclusion and inclusive growth of the country,” the Federation has pointed out in its letter, which has been seen by the The Hindu.

The Federation represents about 500 of the 517 co-operative banks in Maharashtra. While there are about 1562 urban cooperative banks (UCBs) in India, officials in larger banks are also concerned about the UIDAI’s costs but are wary of placing it on record.

Offset by savings: UIDAI

Responding to the issue, UIDAI sources said the licence fee levied on Authentication User Agencies (AUAs) or e-KYC Authentication User Agencies (KUAs), including banks and telcos, by the UIDAI is very nominal given the benefit to the entities from instant verification of their customers through Aadhaar Authentication services.

“It has helped them move to digital and secure medium from paper based verification that has lead to good cost savings. Also, there is no transaction charge as such,” the UIDAI said.

Banks have to pay a fee of ₹20 lakh with a validity of two years for production environment facility for authentication of Aadhaar. For availing pre-production environment facility, a fee of ₹5 lakh is levied, with a validity of three months. If banks want to continue the pre-production facility for more than three months, they have to pay ₹5 lakh again for another three month period. According to bankers, such high charges for enabling the Aadhaar environment for customers are not justifiable since the unique identification numbers were sought to be used for social objectives. The high charges are particularly affecting smaller banks, small finance banks, prepaid payment instrument issuers and smaller non-banking finance companies.

The Federation has requested the UIDAI to revisit its licence fee structure, in sync with the size of an UCB, so that they are not unnecessarily burdened. It also flagged the charges for authentication service agencies which it said are ₹1 crore with a two year validity for production environment facility, and ₹10 lakh for three month validity for pre-production environment facility.

“It has helped them move to digital and secure medium from paper based verification that has lead to good cost savings. Also, there is no transaction charge as such,” the UIDAI said.

Banks have to pay a fee of ₹20 lakh with a validity of two years for production environment facility for authentication of Aadhaar. For availing pre-production environment facility, a fee of ₹5 lakh is levied, with a validity of three months. If banks want to continue the pre-production facility for more than three months, they have to pay ₹5 lakh again for another three month period.

According to bankers, such high charges for enabling the Aadhaar environment for customers are not justifiable since the unique identification numbers were sought to be used for social objectives. The high charges are particularly affecting smaller banks, small finance banks, prepaid payment instrument issuers and smaller non-banking finance companies.

The Federation has requested the UIDAI to revisit its licence fee structure, in sync with the size of an UCB, so that they are not unnecessarily burdened.

The Federation has also flagged the charges for authentication service agencies (ASA) which it said are ₹1 crore with a two year validity for production environment facility, and ₹10 lakh for three month validity for pre-production environment facility.

The Aadhaar (Authentication) Regulation, 2016, provides for appointment of Authentication User Agencies (AUAs), e-KYC User Agencies (KUAs) and Authentication Service Agencies. The Reserve Bank of India as well as UIDAI, through various notifications, have made it mandatory for urban co-operative banks to submit online information to UIDAI, the Federation noted.