Aadhaar may soon be made mandatory for all financial market transactions
The government feels that the Personal Account Number (PAN) may not be enough to plug tax leaks in financial markets, according to The Economic Times.
With an eye on curbing practices such as laundering money through the stock market, the Securities and Exchange Board of India (SEBI) is planning to link Aadhaar to all financial market transactions, the Economic Times reported.
According to two people familiar with the development, the government feels that the Personal Account Number (PAN) may not be enough to plug tax leaks in financial markets.
An official with a financial services company said that top executives from SEBI have already informally informed market intermediaries about the possibility of linking Aadhaar to financial market transactions. Investors and traders may soon need to provide their Aadhaar details to buy stocks and mutual funds.However, what is not clear at the moment is when the announcement will be made and whether or not Aadhaar will replace PAN to become the sole identification number. Aadhaar can be used to conduct the compulsory know-your-client (KYC) check for mutual fund transactions online.
In a case of online KYC done with Aadhaar, mutual fund investors do not need to go to fund houses to submit their forms and get their signatures verified in person.
The government recently announced that Aadhaar be mandatorily linked to PAN, bank accounts and mobile numbers. The deadline for existing bank account holders to provide their Aadhaar details is December 31.
Some brokerages have already urged SEBI to get the government to extend e-KYC to the stock broking industry as well. “Linking financial market transactions to Aadhaar will be an important step to make India a corruption-free country," Nirmal Jain, Chairman of the IIFL Group, was quoted as saying.
Numerous market participants said that although PAN is unique to every individual, it has not been successful in weeding out investors using the stock market to launder their money. There are still a lot of cases of multiple PANs and fake demat accounts being used to push money into the market.“It is important that the government replaces PAN and other identification documents with Aadhaar in financial markets and all other services to make it convenient for people,” Jain said.