In a move that will impact brokerages in getting new investors, leading depository NSDLabruptly shut down Aadhaare-sign services on Thursday midnight. This follows a directive from the UIDAI, according to an internal circular from NSDL .
With NSDL no longer supporting e-sign, brokerages and fintechs will now have to physically onboard customers. eSign is an online electronic signature service that can facilitate an Aadhaar holder to digitally sign a document. Such e-sign signature services were supposed to aid digital transaction and verifications. But NSDL has been facing technical issues in terms of integrating different data sets, mismatches and submission of fakes, sources said.
In early November, following an amendment to Aadhaar rules, markets regulator Sebi had notified about restarting e-KYC for all its regulated entities. But with this decision, capital market entities will not be able to use e-KYC or e-signatures for documentation.
The move will also affect startups like Digio, Veri5, Khosla whose primary business model rides on Aadhaar e-sign services. Sources said NSDL had approached UIDAI on resolution for some of the issues faced by Aadhaar e-sign services.
“e-Sign was envisioned to help industrialists, investors, startups and business owners. Instead of every party being present for signing pertinent company documents or records, with e-sign one can share an agreement with co-founders or partners. One can also send joint signed statement with instructions for banks. But there have been a lot of technical glitches—and not many people adopted e-signatures,” said a source with NSDL.
Another hurdle to the eSign project was Aadhaar’s tokenisation project which did not take off. “When there was fear that the 12-digit Aadhaar number was getting compromised, UIDAI proposed the 16-digit Aadhaar tokenisation system. But nearly a year into the announcement nothing has been done on that front. So eSign was supposed to work as a two-way authentication system, involving the individual’s 12-digit Aadhaar number/16-digit token and OTP. But it hasn’t taken off,” said another source in the financial services industry.
Sources also said that the move to stop supporting e-sign might be a late follow-through of the Supreme Court verdict in September, which prohibits private entities from using Aadhaar. “After the SC verdict, e-KYC was stopped for a while—till there were statements from the finance ministry that a bill would be passed permitting private players to use Aadhaar. So for a while, entities continued using Aadhaar. But with NSDL no longer supporting e-sign, brokerages and fintechs will have to stop using Aadhaar,” said the CEO of a broking house.
