MD & CEO, Axis Securities
Replacing PAN with Aadhaar sounds logical. There is a high level of Aadhaar adoption, higher security and the need for a single unified identification platform. In its fight against corruption, the government has used the Aadhaar framework for every kind of transaction— banking, property purchase and registration and even birth and death records. This will bring about transparency and accountability, revealing the source and means of money involved. Aadhaar is highly secure, making it a robust system to solve the long-standing problem of identification in India. It could help weed out the possibility of fraudulent activities undertaken by holders of multiple PAN and fake demat accounts who misused the stock markets to launder money and evade taxes. Although PAN is also a unique identification proof, the system still has a large number of fake accounts. Looking at the way the government is planning to make use of the Aadhaar platform, it looks like other identification vehicles like PAN may lose ground to a stronger identification platform. At this moment, the bank accounts, income tax returns, PAN card, employees’ provident fund, mobile number etc. are connected to Aadhaar thereby creating an audit trail of transactions. Incorporating the demat account and securities trading/investment account would just help plug the missing link.
CEO and Executive Director, Reliance Securities
Today, the maximum paperwork happens at the time of opening an account, the KYC process, in the BFSI segment. A customer may have to sign as many as 50 times while availing a loan. It is tedious for customers and less efficient for businesses. Not having a standard KYC process across different segments is also a challenge. With Aadhaar, the onboarding of a customer can be made fully digital and standardised. It makes businesses highly compliant and reduces KYC related risks. Chances of mistakes in data entry as well as checking are also eliminated. The true success of any unique identifier is based on penetration and scale. Penetration of PAN is very low compared to Aadhaar. Thanks to the government, more than 98% of adult individuals have Aadhaar. The government should make Aadhaar mandatory across BFSI and allow businesses to digitize processes so that we can focus more on serving customers than compliance operations. Aadhaar gives us the power to transact, paperless, anywhere, anytime. Digitisation based on Aadhaar will pave the way for portability across financial service providers and do away with dormant bank and broking accounts. Customers would choose one or at most two financial services providers and then stick to them or shift from them depending on their satisfaction.
Clinical professor of finance and dircetor, investment laboratory, Indian School of Business (ISB)
Trading in stocks, mutual funds, and other financial instruments remain concentrated in India’s cities, while rural areas languish without access to efficient investment mechanisms. Adding Aadhaar as an adjunct to trading in stocks and mutual funds can broaden the arena of financial inclusion. It would create Aadhaar-linked bank accounts, which can be attached to demat accounts. Aadhaar can become the key for the millions of Indians who remain locked out of the ability to invest due to poor infrastructure and financial education. It is crucial for the underprivileged to have access to investing in stocks. However, the Aadhaar cannot on its own solve the problem of financial inclusion. While the project has increased the use of bank accounts, its success in engaging a larger number of citizens in investment markets relies on the development of an investing ecosystem that takes into account the difficulties faced by customers who remain outside the traditional channels of investment. Just like the PAN, the Aadhaar must grapple with the reality of the Indian context. To help citizens gain access to financial markets, Sebi must use its powers to build investment infrastructure and regulate the market. Regulating what products are available and the sales process to the underprivileged may be even more important than providing access.
Head, Tax, KPMG India
We do not need further compliance in addition to PAN. The government should continue with the current structure—PAN only for stock traders and investors. Submitting Aadhaar as an additional proof for investment purpose may cause unnecessary hardships. The broker community has also said many customers may not be willingly to submit Aadhaar details. Recently, the government had asked taxpayers to link PAN with Aadhaar on the income tax website. Since Aadhaar details are already linked with PAN, asking for Aadhaar details again is mere duplication. Further, all the information which is available from Aadhaar is also available from PAN. It has been seen that Aadhaar details can be misused and therefore, it may not serve as a foolproof solution. Further, there is no appropriate redressal system to resolve issues relating to misuse of Aadhaar. The retail investors are more worried about securing their investments, and if it involves submitting an Aadhaar document, it is little difficult to submit the same keeping in mind the misuse of details. The question is, should one perpetually keep increasing compliance burden on investors? Data is fast becoming a catalyst to derive insights and in identifying loopholes in financial transactions. Therefore, it is essential to correct the course and add data and analytics as a big item on investment plans.