Fintech set for smoother processes with expanded DigiLocker, simplified KYC; PAN to be common identifier for businesses
The government has proposed simplifying the user-verification, or KYC, process, leveraging DigiLocker and Aadhaar for updating and reconciling the identity and address of individuals maintained by government agencies.
The government has moved to enable greater fintech adoption, leveraging DigiLocker and Aadhaar to simplify the KYC process, and PAN as a common identifier for businesses for all digital systems of specific government agencies.
DigiLocker and Aadhaar will serve for updating and reconciling the identity and address of individuals maintained by government agencies and regulators, Finance Minister Nirmala Sitharaman said announcing the Budget for 2023-24.
DigiLocker, the government-backed platform that allows users to store, share and verify important government documents and certificates digitally, has so far onboarded over 14.6 crore individuals and issued 5.6 billion documents.
“To enable more fintech innovative services, the scope of documents available in DigiLocker for individuals will be expanded,” Sitharaman said in Parliament on Wednesday.
Further, the government will set up an enterprise-level DigiLocker for small and large businesses, as well as for charitable trusts, for storing and sharing documents online securely with various authorities, regulators, banks and other business entities.
As for enabling PAN, or the Permanent Account Number, to be used as the principal identity of an entity, this is because currently multiple identifiers are used at the Centre and state levels, such as Corporate Identification Number (CIN), Goods and Services Tax Identification Number (GSTIN), and Tax Deduction Account Number (TDA).
A “common identifier” would simplify processes like clearances, registrations and permits, and help departments manage documents better.
Indians made 7,400 crore digital payments worth Rs 1.26 lakh crore via UPI in 2022.
Digital payments registered an increase of 76% in transactions and 91% in value last year, the Finance Minister said, adding that fiscal support for "digital public infrastructure will continue in 2023-24.”
“A one-stop solution for identity using Digilocker and Aadhaar was needed for long,” said Divam Sharma, Founder at Green Portfolio, a portfolio management service. "We have seen huge documentation processes for every bank transaction, borrowing through loans, making investments, buying insurance and any large-value goods etc. This is a positive for (banking, financial services, and insurance) companies."
Further, financial sector regulators will also be encouraged to have a KYC system fully amenable to meet the needs of digital media, the FM said.
National Financial Information Registry
The government will also set up a National Financial Information Registry that would serve as a central repository of financial and ancillary information, said the Finance Minister.
This will facilitate efficient flow of credit, promote financial inclusion, and foster financial stability. A new legislative framework will govern this credit public infrastructure, and will be designed in consultation with the Reserve Bank of India.
More public consultations
The minister also announced plans for more public consultation in the process of regulation-making and issuing subsidiary directions. Financial sector regulators will be requested to carry out a comprehensive review of existing regulations to “simplify, ease and reduce cost of compliance.”
“For this, they will consider suggestions from public and regulated entities. Time limits to decide the applications under various regulations will also be laid down,” Sitharaman said.