The Unique Identification Authority of India (UIDAI) has issued a circular (see bottom of the post) asking banks to not discontinue Aadhaar Enabled Payment System (AePS). In a letter dated 30 November, the UIDAI issued a clarification after the State Bank of India (SBI) informed the National Payments Corporation of India (NPCI) about its intention to discontinue AEPS, in light of Supreme Court’s Puttaswamy judgement.

The UIDAI said that it has carefully examined the subject matter and says that the Supreme court, in its Puttaswamy judgement, has upheld the constitutionality of the Aadhaar programme, specifically Section 7 of the Aadhaar Act.

In the circular, the UIDAI writes that there is nothing in the Puttaswamy judgement of September 26, which bars the voluntary use of  Aadhaar authenticaton through mechanisms such AePS, BHIM Aadhaay pay etc. Neither does the judgement bar the voluntary use of Aadhaar authentication where a bank account has been opened or verified using Aadhaar e-KYC for the purpose of correctly identifying a current or potential beneficiary of a welfare scheme.

The circular goes on to say that it is obligatory for banks to continue to provide this facility to the people. The UIDAI has marked the circular to banks, the CEO of NPCI and Deputy governor of the Reserve Bank of India (RBI) and added that

“Any action to discontinue such payment/ receipt mechnism (AePS, Aadhaar Pay) or bank accounts by banks, on the ground that it is not possible to distinguish their use for delivery of welfare benefits or other purposes may be held contrary to section 7 of the Aadhaar act and Puttaswamy-II judgement as it will result in creating obstruction in delivery of benefits and may cause denial in deserving cases.”

But does the UIDAI have the constitutional mandate to direct banks to provide Aadhaar oriented services? Is it binding on the banks to follow UIDAI’s circulars?

“While UIDAI is the digital identity regulator in addition to operating Aadhaar, they do not have powers to instruct or tell banks or any entity on any matter that doesn’t relate to use of identity,” Srikanth, a part of CashlessConsumer, told MediaNama. 

He added, “It is to be noted that the SBI never wrote a letter to UIDAI. Its letter to the NPCI (and) RBI were related to operating AePS payment system and use of eKYC that is acceptable by the banking regulator. It is upon the banking and payments regulator to respond and UIDAI can write any letter to anyone, but those do not matter legally.”


The UIDAI circular: