If we go back a few years, more than half a billion people in India had no official ID of any kind, which made it almost impossible to receive any kind of benefits or subsidies like Government subsidies. If you want to avail a personal loan/any other loan or even open a bank account, you needed a number of documents like address proof, birth certificate, identity proof which would often lead to confusion due to discrepancies and delays in approvals.
The Indian Government launched the Aadhaar Card in April 2010, with an aim to provide a foundation for better access of services to a large segment of the population. Today, Aadhaar is being used not just as a proof or identification of citizenship, but also to avail various services like opening a bank account, availing a personal loan, getting a new SIM card or a PAN card, filing Income Tax Returns (ITR) and so on.
Post demonetization, online money transactions are on the rise. The mobile wallets and online banking have got a major boost. With the change in the financial transaction system, people are relying on online services to pay or receive funds. People have started relying on online aggregators and finance providers, to get personal loans online, quickly and conveniently.
Earlier an individual had to go through the process of physically going to the bank, meeting the loan officer, submitting the copies of documents and filling up forms to avail a loan. The process of verification took days and was very tedious. But with digitization and Aadhaar, the process of applying for and availing a loan has become really simple.
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Aadhaar card is basically a 12-digit Unique Identification Number (UIN) provided to all the citizens by the Government of India, by collecting their fingerprints and iris scans called biometrics. The Government launched the Aadhaar card keeping in mind the following objectives:
Aadhaar Card for financial inclusion: For several years, India’s financial institutions tried to expand their reach by opening more bank branches, but this resulted in high operating costs as low-value services were driven by paper-based verification. Aadhaar came to rescue of these financial institutions, as these problems could be solved, just by using technology through e-KYC. This has helped in financial inclusion and has provided easy access to loans for the common man. Increasing access to financial services can lead to increased economic prospects for individuals and communities.
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Impact of Aadhaar on the Private Sector: As the Indian Government has made it mandatory for all Indian citizens to have an Aadhaar card to avail Government services, even the private sector has started relying on Aadhaar to verify candidates while hiring them, for opening a bank account and for other services. Various online finance providers are asking consumers to do their KYC, which requires an Aadhaar card, so that they can avail instant loans.
Post demonetization, cashless transactions have got a major boost and people have started relying on online finance providers, to get quick hassle-free loans on aadhar card. In past years if you wanted to avail loans, you had to carry all documents and stand in long queues at the bank. The verification process would take days or weeks.
Digitization and the Aadhaar Card have revolutionized the loan approval and disbursal process. With the help of technology, online finance providers have launched paperless electronic KYC called e-KYC, where the customers need not submit physical documents for aadhar card bank loan approval. Aadhaar makes authentication and the verification process very easy and this has led to instant loan disbursal.
The big question….Is Aadhaar safe? The Aadhaar database is one of the largest Government databases in the World and contains demographic and biometric data of scores of citizens. As a large database with data on Crores of citizens is a juicy target for hackers, there are reports of Aadhaar data leaks and also gangs generating fake and duplicate Aadhaar cards and selling the Aadhaar card details to service providers. These security leaks are being looked into and measures are being taken to keep your personal data safe.
The Aadhaar card was introduced in April 2010, with the main objective of providing a universal identity to each resident of India. The direct benefit of this is the smooth flow of the Direct Benefit Transfer (DBT) schemes, such as unemployment benefit, LPG subsidy, National Pension Scheme and so on. With the introduction of the Aadhaar, the need for middlemen was eliminated, as there was no need for people to go through third-party verification of documents. The government of India had been trying for many years to bring the rural and illiterate population of India into financial inclusion. With all the previous forms of documentation requiring some form of PIN or signature, it was not feasible. The Aadhaar, however, maintains the biometric information of a person and uses this for verification. Today, the Aadhaar not only serves as a proof of identity, but also as a means of verification for availing government schemes, opening bank accounts, passport acquisition, and almost every other place imaginable. One card serving many purposes, like identity proof, age proof, address proof and so on, has eased the process of availing services from financial institutions, the government, and private institutions.
Availing any financial service requires customers to furnish Know Your Customer (KYC) documentation to the concerned institution. The government had formulated strict guidelines for all financial institutions regarding KYC, so as to reduce the cases of money laundering. Earlier, KYC compliance was time consuming, as it involved a lot of paperwork. With the introduction of the Aadhaar, the whole process was digitized, with the banks now using e-KYC. The Aadhaar database has a record of the biometric data of all applicants, and since it is a central database, any financial institution linked to it can make use of the Aadhaar database for easy verification and completion of the KYC process.
Personal Loans are unsecured loans, so lenders take extra care to whom they lend, the KYC process of the aadhar loan applicant and other safety measures. Both Public and Private sector banks require proper verification and validation of the loan application. Traditionally, this involved going through the various documents submitted by the applicant, which increased the processing fees borne by the applicant, and also the turnaround time. These days, using Aadhaar as a means of verification has significantly reduced the cost to the applicant and the turnaround time for loan approval. The recent verdict of the Supreme Court, which struck down Section 57, and prohibited private companies from making Aadhaar compulsory for verification, has brought up a new challenge in the process of verification. Customers can however, still choose the ease of Aadhaar verification for e-KYC.
Personal Loans are generally availed for emergencies, where the borrower is in urgent need of funds. If the process of availing a loan takes a long time, the very purpose of the Aadhar Card loan is defeated. With the introduction of Aadhaar and digitization of the KYC process, it has become much easier than ever before to avail a Personal Loan. The Aadhaar database contains all information like, name, age, and address. This allows quick cross-verification of the details held by the bank, which means the borrower can get a loan without much delay. The Aadhaar card also makes you eligible for many financial services that are offered by banks and other financial institutions.
Though it is not mandatory for borrowers to provide the Aadhaar, it still makes the process of availing loans, comparatively easier. The effort and the time taken by the bank employees to verify documents and for the identification of customers, have reduced drastically. With the help of technology, online finance providers have launched paperless electronic KYC called e-KYC, where the customers need not submit physical documents for loan approval. Aadhaar makes authentication and the verification process very easy and this has led to instant cash loan disbursals. The use of Aadhaar card in loans is the base of modern lending. The instant cash loans which are claimed to be disbursed within hours become possible, only because of the online verification of the applicant, via e-KYC. Online loans which are better known as instant personal loans can even be availed by sharing the scanned copy of your Aadhaar card as the only document to prove your identity.
Personal Loans are unsecured loans which can be availed for any purpose. Personal loan is sanctioned according to the income and repayment capacity of the borrower. Salaried professionals falling within the age bracket of 21-60 years, having a regular income and employment experience, can avail a personal loan. Self-employed professionals within the age bracket of 21-65 years, having a regular income and employment experience are also eligible to apply for a personal loan. However to avail a personal loan, the following documents must be submitted:
The people eligible under this category are salaried doctors, chartered accountants, employees of private limited companies, and employees of public sector undertakings including state, central and local bodies. The personal loan documents that must be submitted by a salaried person include:
The people eligible under this category are the Self Employed including Individual Proprietors, Partnership Firms and Private Ltd. Companies and those involved in manufacturing, trading or services. Personal loan documents to be submitted by self-employed professionals include:
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There are few banks that consider giving personal or home loans without documents like bank statements. But to obtain such a loan, the customer must maintain a good relationship with the bank. If the customer has records of paying loans on time and a clear credit report the bank may offer a loan based on the information already available with the bank. Mentioned below are some of the points you must consider to avail a document free loan:
If you pay EMIs on time and have a good transaction record, then it helps in building a good relationship with the bank. If you are applying for a personal loan at a bank that operates your main account and daily transactions, then it becomes easier for the bank to consider you for the personal loan. It helps the bank assess your credit worthiness, making it easier for the bank to calculate loan eligibility and repayment capacity
It is important to pay all your dues on time. This helps in maintaining a good credit score. If you are holding a credit card with the bank, then paying all your credit card bills on time, puts you on a higher pedestal vis-à-vis availing a personal loan from the bank. Credit card dues can affect credit score badly. So, it is advisable to clear credit card dues and then apply for a loan.
Based on credit history, the credit score of an individual is generated. The CIBIL Score is a 3-digit number ranging from 300-900. The closer your score is to 900, the stronger your credit profile. A Credit Score plays a critical role in the loan and credit card approval process. So, maintaining a high credit score helps in building trust with the bank and the lender understands that you are a safe customer.
If you already have loans with the bank, then make sure to pay your EMIs on time. Missing EMIs or payments with the banks is a sign of incapability of handling finances and therefore, banks and lenders might ask you to provide a solid proof of Income
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