National Securities Depository press pause on e-sign services for some companies
The National Securities Depository (NSDL) has since 13 December stopped all electronic signature services to various companies, Tech2 has learnt.
The Mumbai-based depository for stocks and shares for Indian investors sent a letter, a copy of which has been seen by Tech2, to its customer companies late on December 12 announcing the decision to discontinue eSign services.
“As advised by UIDAI, we are stopping e-sign services with immediate effect,” the letter said.
eSign services allowed Aadhaar holders to digitally sign a document.
The move means that the companies using the platform of NSDL, a certifying authority, to digitally authenticate and collect signatures of customers at the time of onboarding will not be able to do so.
These include digital lending companies, digital stockbrokers and many others. Multiple private entities were offering these services in partnership with NSDL, which will also stop, a source said.
Electronic signatures allowed customers to be onboarded remotely and digitally by NBFCs, digital stockbrokers and other financial service providers without paper signatures and physical visits.
The service authenticated the individual customer through an Aadhaar-based electronic know your customer (e-KYC) mechanism at the backend.
“Since the Supreme Court order banned private entities from accessing Aadhaar, all eKYC had anyway stopped, but these services were working on the assumption that these were backed by law, now with NSDL stopping its services, remote onboarding of clients will stop,” said a founder of a fintech startup on condition of anonymity.
After the judgment, the Unique Identification Authority of India (UIDAI), tasked with issuing the 12-digit biometric Aadhaar, asked certifying authorities to give a declaration that e-signs were not against the spirit of the Supreme Court’s order.
With the declaration, the services had continued but with NSDL being advised to stop, these would come to end, the source said.
There are several NSDL-like certifying authorities such as eMudhra, SafeScrypt and C-DAC. NSDL was one of the most popular service-providers, extensively used by fintechs. One of the sources mentioned above told Tech2 that most of the other certifying authorities had already stopped issuing eSigns to private companies. However, this could not be independently verified.
The Indian fintech ecosystem is built on a digital stack that allows remote customer onboarding through Aadhaar-based KYC and signatures through eSign.
After the country’s top court restricted access to the biometric database, companies have had to go back to paper-based processes that have increased the cost of customer onboarding and made it difficult to reach out to consumers in small towns and villages.
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