With an aim to curb practices like money laundering through the stock market, the Securities and Exchange Board of India (SEBI) is planning to link Aadhaar to all the financial market transactions. The Government is of the opinion that the Personal Account Number (PAN) is not enough to plug the tax leaks in the financial market. Various instances of money laundering and tax leaks have been noted in the country, due to which the Government plans to take this step.
An official in the financial services company mentioned that the top executives from SEBI have informally informed the market intermediaries about the possibility of the linking of Aadhaar to financial market transactions. Investors as well as traders may have to provide their Aadhaar details in order to purchase mutual funds or stocks.
However, it is not yet clear when the announcement will be made and whether Aadhaar will replace PAN to become a sole identification number. Aadhaar can be used for KYC for mutual funds online and it has already become mandatory to link the Aadhaar with the Bank accounts. This move is expected to have a positive impact on the financial transactions across the country. In case of an online KYC done with Aadhaar, mutual fund investors will not have to go to the fund houses in order to submit their forms or to get their signatures verified in person.
The Government has announced that Aadhaar should be mandatorily linked to PAN, mobile numbers and bank accounts. The deadline for linking the Aadhaar with the bank account is December 31. Some brokerages have already urged SEBI to get the government to extend the e-KYC facility to the stock broking industry as well.
Linking Aadhaar to financial market transactions will be an important step towards making India a corruption free economy. Various market participants agreed that PAN is unique to every individual; it has not been successful in removing the investors who use stock market to launder their money. There are many cases of multiple PANs and fake demat accounts that are used to push money into the market. Many transactions in the market go unreported and untaxed due to the fake accounts. Linking of the Aadhaar with the transactions will ensure additional security and make it convenient for people as well. The Government will be able to keep a check on the transactions in mutual funds as well as the stock market. There will be an additional transparency and a decline in the number of frauds and unreported transactions taking place across the market. The financial markets play a crucial role in the economy of the country and this move will help strengthen the market and keep a watch on the movement of money.