Is Aadhaar card mandatory for a business loan?

When one does decide to opt for a business, one of the first things that come to mind is, Do I apply for a business loan? Do banks provide small business loans? Is it possible to get an unsecured business loan online? Can I avail of a buddy loan where a business loan can be availed hassle-free? all this and more benefits can be crossed using Buddy Loan. Avail a business loan with Buddy Loan, now! 

One of the first thoughts that comes to mind is the formalities that need to be completed as part of the process to avail of a business loan. 

There are certain KYC (Know Your Customer) requirements as well. Whether applying for a loan online or whether one decides to go to a bank or a financial institution and undergo the physical process of the offline application, it is mandatory by law as enacted by the government to collect certain KYC (Know Your Customer) documentation.

Banks and financial institutions are obligated by law to collect such information as well as to keep the said documentation updated from time to time.

Various documents can be considered as eligible to be considered as eligible or valid KYC (Know Your Customer) documentation. Some such documentation would include Passport, Voter Identity Card, Driving License, PAN Card, NREGA Card as well as Aadhar Letter/Card. 

The KYC (Know Your Customer) documentation is required as proof of identity as well as proof of address/residence. Anyone document is allowed, and Aadhar Card is not mandatorily required as a KYC (Know Your Customer) document.

However, before 2018, many or almost all banks and financial institutions into a document made Aadhar Card mandatory in order to open accounts as well as to avail loan facilities with them as per the directives of the Government of India.

The Aadhar Card was sought to be made into an identification document that is similar to the Social Security Card in the United States of America. Therefore, to avail of loans either offline or through the online mode, Aadhar Card was a mandatory document without which, the loan was liable to be rejected.

However, according to the judgment given by the Hon’ble Supreme Court of India, banks may use the Aadhar Card as a KYC (Know Your Customer) only in case the customer consents to its usage. The Reserve Bank of India has also issued such clarification in light of the decision given by the Hon’ble Supreme Court of India.  

However, even though the Aadhar Card is not a mandatory document, it can be said to be a comprehensive document, in that it includes the name, address as well as the fingerprint information of the individual and therefore, the process of verification via the electronic mode is faster and cheaper.

Banks have an E-KYC process where KYC (Know Your Customer) verification has been digitalized. In such a scenario, even though Aadhar Card is not mandatorily required, it does speed up the verification process and enables faster processing of the business loan. Even financial institutions prefer the Aadhar Card for faster verification, whether the loan is sought through the online or offline mode.

In case a loan is sought through the online mode, it is even possible to get an instant business loan online in case Aadhar Card is uploaded as a KYC (Know Your Customer) document as the identity verification can be instantly done, and the KYC (Know Your Customer) process can be instantly completed because the identity of the borrower can be instantly verified through the e-verification process.

Aadhar Card, are mandatory KYC (Know Your Customer) document, it is still the most preferred document in terms of the ease of use and verifiability.