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Soon, Aadhaar May Be Linked To Share Market Transactions

The move comes about as a result of the government’s supposed realization that the PAN number is not much of a deterrent in stopping fraudulent transactions.

News18.com

Updated:August 10, 2017, 12:15 PM IST
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Soon, Aadhaar May Be Linked To Share Market Transactions
Image for representation (Photo Credit: Reuters)
New Delhi: Your Aadhaar number may soon be linked to share market transactions. According to market participants, the Securities and Exchange Board of India is likely to consider the possibility of linking the UID number to purchase and sale of stocks and mutual funds.

If implemented, this move would have far reaching implications. While on one hand it would help in curbing fraud, especially using the stock markets to whitewash black money, on the other it could lead to fear of state scrutiny and may hurt investor sentiments, at least in short term.

The move comes about as a result of the government’s supposed realization that the PAN number is not much of a deterrent in stopping fraudulent transactions.

The issue of the use of stock markets for illegal or fake transactions has come up before. Multiple PAN numbers used by the same entity has been flagged as an issue. Linking market transactions to the UID could theoretically solve this because the biometric identification would eliminate the same person having multiple IDs.

News18 asked a few market participants about the move, but didn’t get a confirmation about the move. However, the chairman of an investment firm said that it was common knowledge that markets were used to whitewash money. Black money would be spirited out of the country by over invoicing imports. The cash would be round tripped via international tax havens and be invested back in the country through the stock markets.

The government recently closed the international routes by signing agreements with Mauritius and Singapore to amend the Double Taxation Agreements, through which a lot of FII investment in India comes in. These are the typical routes that round tripped money uses to come back to India.

The other issue that has been flagged, even by intelligence agencies, is the use of market instruments like Participatory notes. P Notes, as they are called, allow overseas investors to invest in India without disclosing their identity. Intelligence agencies have flagged this as a threat to national security. Using an UID number for market transactions, particularly equity investments, may be viewed as a solution by the government. But it is still unclear if foreigners will also have to get an Aadhaar number to conduct market transactions.
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