Millions of bank account holders across the country will have to compulsorily link their accounts to their Aadhaar number by December 31, 2017. The Reserve Bank of India (RBI) on Saturday clarified that linking Aadhaar to bank accounts is mandatory. The directive came ahead of the Supreme Court hearing on a batch of petitions on Aadhaar-related matters in November. The union government has said it would extend until December 31 the deadline to furnish Aadhaar to avail benefits of social welfare schemes.

In its clarification, the RBI said that “in applicable cases, linkage of Aadhaar number to bank account is mandatory under the Prevention of Money-laundering (Maintenance of Records) Second Amendment Rules, 2017 published in the Official Gazette on June 1, 2017.” According to the RBI, these rules have “statutory force and, as such, banks have to implement them without awaiting further instructions”.

Banks have of late been flooding their customers with emails and SMS messages, asking them to link their bank accounts with their Aadhaar number. Banks have been informing customers that their accounts would become inoperative on January 1, 2018, if the linkage is not established. Sources in banks said some customers have been holding out on linking their accounts with Aadhaar, waiting for the Supreme Court verdict on the legality of the government order. The petition before the court argues that the directive to link Aadhaar violates the fundamental right to privacy and equates citizens with money launderers.

“The RBI, as the banking regulator, should be asking customers to link their accounts with Aadhaar. It’s not the government’s business to prescribe what banks and their customers should do,” a customer complained. The Indian Banks Association (IBA) has already taken up the issue of making banks the registrar and enrolment agency for Aadhaar. In a note to the government and the RBI, IBA has said that under the Banking Regulation Act, only the RBI is empowered to issue directives to banks.

Back-of-the-envelope estimates suggest there are over 1,500 million deposit accounts (including term deposits) in India. However, a World Bank report says the dormancy rate in India is quite high, at 43 per cent. The government had earlier this year made Aadhaar mandatory for opening bank accounts as well as for any financial transaction, including mutual fund investments.

Finance Minister Arun Jaitley, in Budget 2017, had mandated seeding of Aadhaar number with Permanent Account Number (PAN) to avoid individuals using multiple PANs to evade taxes. The Prevention of Money Laundering (Maintenance of Records) Rules, 2005, mandated quoting of Aadhaar along with PAN or Form 60 by individuals, companies and partnership firms for all financial transactions of Rs 50,000 or above.

That the government is serious about ensuring the linking of Aadhaar with bank accounts is reflected in the fact that every week, the progress on this front is reviewed with all banks by the Finance Ministry and with top bank officials periodically, a banker said. Telecom service providers too have been alerting their customers to link their mobile numbers with their Aadhaar numbers by February 6, 2018, citing a circular issued by the Department of Telecom (DoT).