The Reserve Bank of India (RBI) is looking to get a clarification from the Supreme Court on the usage of Aadhaar cards by banks as identity proof of their customers.
"RBI is likely to ask the Supreme Court to elaborate on certain parts of the 11 August interim order," said a lawyer close to the development, requesting anonymity.
Last month, the court had ruled that Aadhaar was "neither mandatory nor a condition for accessing benefits one was already entitled to".
The apex court also ordered that the Aadhaar number should be used only for public distribution schemes and LPG subsidies.
Surprisingly, RBI governor Raghuram Rajan has recently supported the usage of Aadhaar, citing countries like the US, where the social security numbers are being used without violating the privacy code, Livemint reported.
"...It would be sad if its (Aadhaar's) use were severely restricted. Learning from worldwide experience, we need to see how we can satisfy the concerns of the Supreme Court without undermining the value of the unique ID. The unique ID can enable a variety of economically valuable activities that particularly benefit the bottom of the pyramid," Rajan said on 18 September.
The issue of using Aadhaar by banks for customer identification purposes comes at a time when the RBI is working on expanding the banking network in the country. The bank recently gave in-principle approval to 11 entities to start payment banks and 10 others have got license to open small finance banks.
"As a microfinance institution, we use Aadhaar as an identification because it helps us in identifying duplicate loans. In the future when we become a bank, usage of biometrics will allow us to provide automated services in a much better way," said Samit Ghosh, chief executive officer and managing director, Ujjivan Financial Services Pvt. Ltd, which was allowed to run small finance bank.
"There are many mistakes in other identification cards that we notice," Ghosh said.