India Post Payments Bank will send money via Aadhaar sans bank account linking

India Post Payments Bank will be able to send and receive money through an Aadhaar and it won’t matter if it will be linked to a bank account or not, reports the Economic Times. AP Singh, interim managing director and CEO of the newly formed payments bank, told the publication that the Aadhaar will be made a payment address which can work with or without a bank account linked to it.

Singh, who was also a member of the Unique Identification Authority of India (UIDAI), also said that there was pilot with five banks which included the State Bank of India to test the model but the project did not take off due to the low penetration of broadband in the country and discomfort of mobile applications.

Note that Singh’s statement runs contrary to the Reserve Bank of India (RBI) stand. In a speech yesterday, R Gandhi, deputy governor of the RBI, was responding to why some non-bank entities cannot be allowed to keep accounts. “Our answer is simple. If you maintain “an account”, then you are a bank and you need a banking licence,” he said. “When you keep the money of the public in “account”, you are a financial entity taking deposits and you must be public trustworthy and so be regulated as a deposit taking financial entity,” he added.

To be clear, India Post Payments Bank does have a payments bank licence from the RBI. However, the UIDAI does not have a banking licence and as such, the Aadhaar cannot be used to keep an “account” of money. It is unclear how India Post Payments Bank will be able to offer the service or if other players in the payments industry will be able to offer the same.

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The department of posts got a payments bank licence last month and began pilot operations in Ranchi and Raipur.

Aadhaar Pay and Aadhaar Enabled Payment System (AEPS)

Last month, the government launched a new payment mechanism called Aadhaar Pay which would allow any person with his Aadhaar number linked to Bank account, can make and receive payment, with a thumb impression alone. Note that this still does require linking of a bank account.

Note that Aadhaar Pay is not the same as the Aadhaar Enabled Payment System (AEPS). The AEPS is a financial inclusion product developed by the National Payments Corporation of India (NPCI) which allows cash withdrawal, deposit and funds transfer at POS (MicroATM) through a business correspondent of any bank using the Aadhaar authentication.