SEBI permits intermediaries to use e-KYC Setu for Aadhaar-based verification: What it is and how it works

To simplify the KYC process in securities markets, Securities Exchange Board of India (SEBI) has allowed registered intermediaries to use the e-KYC Setu System developed by the National Payments Corporation of India (NPCI).This system offers an additional digital option for Aadhaar-based e-KYC, alongside existing mechanisms such as UIDAI’s e-KYC services and Digilocker.

What is e-KYC Setu?

e-KYC Setu is a digital identity verification system created by NPCI in partnership with UIDAI. It enables reporting entities, including those regulated by RBI or SEBI, to verify the identity of customers without storing or disclosing their Aadhaar numbers.NPCI states that the system reduces the complexity of onboarding and limits the handling of sensitive Aadhaar data. Instead, it offers flexibility in choosing the right tech platform based on a firm’s specific use case.

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Who can use it?

All SEBI-registered intermediaries—such as stock brokers, mutual fund distributors, portfolio managers, and investment advisers—can now use e-KYC Setu. They may adopt it as an alternate channel to conduct Aadhaar-based KYC of their clients.

How does it help?

The new mechanism streamlines customer onboarding and cuts down the compliance burden. Entities can also sign up quickly through NPCI’s single-window onboarding system.

SEBI announced this move in a circular as part of its efforts to improve ease of doing business in the financial sector.

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