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Jinoy Jose P | Updated on March 08, 2018 Published on September 19, 2017

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Linking Aadhaar with bank accounts not in sync with the law

Bank customers in India are worried. Most of them have been receiving regular messages from the entities they have trusted their money with, asking them to link their accounts with the Aadhaar number, as per a recent notification from the Centre. If customers fail to comply before December 31, banks will deactivate the accounts.

But can they do this? Is it constitutional? Experts suggest there may be a problem. The Centre introduced this new requirement on the back of the Prevention of Money Laundering (Maintenance of Records) (Second Amendment) Rules 2017. The notification cashes in on the powers it enjoys on behalf of Parliament under the Prevention of Money Laundering Act 2002. That much is fine. But the legality of threatening customers with penalty and deactivation does not hold up because the Aadhaar Act 2016, does not allow for the same. The Act clearly says where the biometrics-enabled unique identification number should be used. And bank services do not feature in the category.

Section 7 of the Act says that the Centre or States may use the number for the “purpose of establishing identity of an individual as a condition for receipt of a subsidy, benefit or service for which the expenditure is incurred from Consolidated Fund of India (read Government money)”. Hence, even linking Aadhaar with PAN was not legally tenable. Which is why the Government went in for a parliamentary amendment to the Income Tax Act rather than resorting to its own power to form rules. But the money laundering Act, say experts, does not necessarily offer it room to override clauses in Section 7 of the Aadhaar Act. There is also concern that third parties such as private banks having unchecked access to Aadhaar may lead to data misuse.

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Published on September 19, 2017

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