Plans to petition UIDAI, Law Ministry after Supreme Court barred private companies

The State government is set to send a request the Unique Identification Authority of India (UIDAI) to find a way to give digital payments startups access to Aadhaar’s biometric database.

A total of 100 startups may be restricted from participating in the State’s new FinTech Policy following the Supreme Court judgement which bars private companies from accessing the Aadhaar database. But Maharashtra will petition UIDAI and the finance and law ministries to find a way out, according tosenior officials.

“We don’t know what the way out is but will approach UIDAI for an exemption or some sort of guidelines to exempt the financial technology (fintech) startups. With the court ruling, these firms may have trouble accessing the Aadhaar database,” said S.V.R. Srinivas, Principal Secretary of the Information Technology Department, Government of Maharashtra.

The digital payments companies are already lobbying with the finance and law ministries for a law that will allow them access to the biometric database following the judgement earlier this year. Small fintech companies with low-cost business models fear not being able to complete the customer verification and e-Know Your Customer (KYC) requirements in the absence of access to Aadhaar biometrics. If the companies go for physical verification instead of e-KYC, it would only burden them with process costs.

Most of the 100-odd fintech startups are from the State and have already shown interest in participating in the new fintech policy, called LEAP. The acronym stands for reforms in four major areas: lighter regulation, enabling environment, augmented infrastructure and partnerships. The policy was launched by Chief Minster Devendra Fadnavis at the World Economic Forum in Davos earlier this year and plans a new state-of-the-art fintech ‘Hub in Mumbai’ and a regulatory sandbox, put together as part of the guidelines of the Sudarshan Sen Committee of the Reserve Bank of India (RBI). “The RBI is also helping us set up the regulatory sandbox and even though the judgement is a blow to fintech firms, we will try and address this,” said Mr. Srinivas.

The State government has already applied new fintech models in the Integrated Child Development Services, which has been improved using Aadhaar. As part of this experiment, Yes Bank supported development of a customised software to digitise fund disbursement for 2,00,000 anganwadi workers. In other experiment, a fintech called MahaWallet was created to make mobility payments, such as at a toll, under the Smart City scheme.