Role of Aadhar in Banking System

• Unique Identification Authority of India (UIDAI) established by the Government of India is implementing the Aadhar scheme.
• Its objective is to implement Multipurpose National Identification Card or Unique Identification Card (UID Card)
• Head, Shri. Vijay S Madan (as on April 2014).
• Budget Rs 3,000 Crore.
• Objective to cover 60 Crore residents by 2014.
• Unique 12 digit number for every resident of India.
• Aadhar is used to prove identity not citizenship.
• Large number of residents, who currently don't have any identity documents and are therefore excluded from beneficiary list can also get an identity.

 Aadhar Enabled Payment System (AePS)

• Indian payment system developed by National Payment Corporation of India (NPCI) based on unique identification number. 
• The system allows an Aadhar holder to carry out financial transactions on a micro ATM provided by banking correspondence.
• Public Sector Banks already started entering MOU with UIDAI to act as Registrars for AADHAR project.
• Major constrains faced by the banks while opening of account is the absence of valid identity and address proof of the prospective customers.
• Aadhar number may be treated as substitute for KYC compliance which enables the banks to open accounts with a greater speed and accuracy.