The government has set a deadline for banks to link customers’ accounts to their Aadhaars by December 31, 2017, and those accounts where this is not done before this date will ‘cease to be operational’. Undoubtedly, before the December 31 deadline, no bank can make your account un-operational due to non-compliance with the Aadhaar linking requirement.
The Ministry of Finance amended the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 through a notification dated June 1, 2017. As per the amended rules, new bank accounts opened post the above-stated notification will have to be linked with Aadhaar at the time of opening the account or within 6 months from the date of opening the bank account. Further, existing bank accounts are have to be linked with Aadhaar by December 31, 2017.
Elaborating the finance ministry directive, Puneet Gupta, Director, People Advisory Services Ernst & Young said, “It is important to note that these rules apply to all individuals, companies, firms, trust, associations, etc who have a bank account. For companies, firms, trust and associations, the individual authorised to transact on its behalf is required to link his/her Aadhaar with the respective bank account. Exemption is only available if the individual is not eligible for Aadhaar i.e. a non resident as per Aadhaar rules.”
To comply with the finance ministry directive, banks are now not opening new accounts without Aadhaar and have been giving constant reminders to those who still haven’t linked their accounts with the 12-digit biometric number.
Image: SMS reminder for HDFC customers who haven’t linked their bank account to Aadhaar.
Image: Email reminder by HDFC bank to link bank accounts with Aadhaar
However, following the Supreme Court’s judgement in August making right to privacy a fundamental right there are doubts as to whether linking Aadhaar with banks savings accounts, PAN and other accounts or documents will remain mandatory.
Speaking about the implications of the Supreme Court ruling on the finance ministry directive, Gupta says, “The Supreme Court’s decision on Right to Privacy being a fundamental right does not deal with the validity of Aadhaar. The judgement is silent on the validity of Aadhaar and its implications. A separate bench of the Supreme Court will evaluate whether Aadhaar being mandatory is constitutionally valid or does it infringe one’s right to privacy.”
“The amended rules, which require Aadhaar to be linked with bank accounts, will continue to apply until the Supreme Court clearly states in its ruling that either Aadhaar cannot be made mandatory or the amendment made in the aforesaid rules is constitutionally invalid,” adds Gupta.
Though there are a slew of petitions challenging the validity of Aadhaar, the Supreme Court ruling in August didn’t say that Aadhaar is an illegal or an invalid document. All these petitions will have to be examined individually to find out if Aadhaar infringes a citizen’s right to privacy.
Divya Baweja, partner at Deloitte Haskins & Sells says, “The latest Supreme Court ruling says that privacy is fundamental, but it also says that privacy is not absolute. The intention of the government is to replicate the system followed in advanced economies, i.e., issuing Social Security Numbers to individuals. Linking Aadhaar to bank accounts addresses multiple issues like tax evasion, duplicate PANs, misuse of government funded subsidies and more.”
Should you link your Aadhaar to your bank account or wait for the Supreme Court ruling?
The question on everyone’s minds right now is that should you link your bank account with Aadhaar? Well, considering that the rule to make Aadhaar mandatory for opening new accounts has already been enforced by banks following the finance ministry directive, it would appear that as per current situation, existing account holders will not be given an exemption.
As far as the Supreme Court’s decision is concerned, it has already established that Aadhaar is not illegal and privacy is not absolute. However, the upcoming decision is yet to clarify if making it mandatory is legal. Hence, if the government has its way, bank accounts not linked to Aadhaar will cease to become operational and consequences could be worse than that of demonetisation. Blocking of one’s savings account will obviously lead to huge inconvenience and may well put a stop to your financial life. Imagine being stuck in a situation where your salary is not getting credited to your bank account, you cannot withdraw cash at ATMs, swipe your card or even make online transfers to pay your rent or loan EMIs and more. Therefore, seeding bank account with Aadhaar before the deadline would help you avoid unnecessary hassles in case the government directive is fully enforced by December 31.
Can you retrieve your account?
You can re-activate your account by submitting the required documents and linking it with Aadhaar. According to the finance ministry directive, “Provided that in case client already having an account based relationship with reporting entities prior to date of this notification fails to submit the Aadhaar number and Permanent Account Number by 31st December, 2017, the said account shall cease to be operational till the time the Aadhaar number and Permanent Account Number is submitted by the client.” However, there is no mention on how long it will take to retrieve your bank account once it becomes inoperable.
Exemption given only to small accounts
Not all types of bank accounts will become un-operational if they are not linked with Aadhaar before the deadline. Small accounts are exempt from this directive as these can be opened even without Aadhaar.
A small account is a bank savings account where:
1. The aggregate of all credits in a financial year does not exceed Rs 1 lakh;
2. The aggregate of all withdrawals and transfers in a month does not exceed Rs 10, 000;
3. The balance at any point of time does not exceed Rs 50, 000.
As per the notification: An individual who desires to open a small account in a banking company may be allowed to open such an account on production of a self-attested photograph and affixation of signature or thumb print, as the case may be, on the form for opening the account.
The small account shall remain operational initially for a period of twelve months, and thereafter for a further period of twelve months if the holder of such an account provides evidence before the banking company of having applied for any of the officially valid documents within twelve months of the opening of the said account, with the entire relaxation provisions to be reviewed in respect of the said account after twenty-four months.