The incremental new customer accretion will get slower until the bank comes up with new solutions on Aadhaar usage
Kotak Mahindra Bank has temporarily suspended its digital savings account opening scheme '811' as a consequence of the Supreme Court verdict, which bars mandatory usage of Aadhaar card as identity and KYC proof in banks.
"About 3/4th of our account opening has been through 811...The incremental new customer accretion gets impacted till we come up with a new solution and we are working on a few," said Dipak Gupta, Joint Managing Director of Kotak Bank.
KYC is know-your-customer guideline which can be met by providing six officially valid documents including Aadhaar card number as mandated by the Reserve Bank of India (RBI).
The bank said it met its target of doubling its customer base to 16 million in 18 months ending September from 8 million customers at the time of the launch of 811.
In March 2017, Kotak Bank had launched 811 as a zero-balance savings account, playing on the date when demonetisation was announced in the 11th month of 2016 -- November 8.
As on September end 2018, Kotak Bank's CASA (Current And Savings Accounts) ratio increased to 50.2 percent of total accounts from 47.8 percent last year.
According to the bank's Founder and Chief Uday Kotak, demonetisation brought in a huge drive of digitisation and biometric is a crucial part of this transformation, the result of which was 811, that allowed E-KYC through Aadhaar.
In September end this year the Supreme Court said bank customers can’t be forced to link their bank accounts to Aadhaar. It also said a bank account will not be denied or ceased on the basis that a prospective customer does not have an Aadhaar number.
The apex court order can lead to a relatively slower account opening for the bank going forward.
Gupta said, "The KYC that is already done before the SC verdict will be as it is. From now onwards, customers can cancel the Aadhaar linkage and if they cancel that then those accounts opened with Aadhaar would stay cancelled (including 811)."
He added that Aadhaar is a convenient way of opening account and all details including date of birth, age and gender are all available at one place.
Banks also feared the cost of KYC verification would increase with the SC verdict.
As of now, Aadhaar card authentication is allowed under direct benefit transfer (DBT) schemes and Aadhaar enabled payment services (AEPS).
Over the last couple of years, most banks had started opening online bank accounts using Aadhaar and one-time passwords (OTP).
Calling it India’s downloadable digital bank, Kotak said 811 enabled it to increase its share of customers through the digital platform in this highly competitive retail banking space fighting for a share of CASA.
It offered a completely digital and paperless account opening experience. It promises to open anywhere, anytime, within five minutes through its Aadhaar-based OTP authentication process for account opening on mobile. Account opening and operations under 811 require Aadhaar and PAN numbers.
811 offers a zero-balance digital bank account with zero charges for all digital transactions, where customers can earn up to six percent interest per annum on their savings account balances.