Aadhar enabled payment system


Preliminary   > Economic Development   >   Indian Economy and Issues   >   Financial inclusion

Why in news?

  • NPCI sets standardised limits for cash withdrawals and mini statements on Aadhaar-enabled Payment System (AePS)  transactions

About Aadhar enabled payment system:

  • AePS is developed by the National Payments Corporation of India (NPCI) that allows people to carry out financial transactions on a PoS (Point of Sale / Micro ATM) by furnishing just their Aadhaar number and verifying it with the help of their fingerprint/iris scan.
  • With the help of this payment system, funds can be transferred from one bank account to another simply through their Aadhaar numbers.
  • The only inputs required for a customer to do a transaction under this scenario are:
    • Bank Name
    • Aadhaar Number
    • Fingerprint captured during enrollment.

Services Offered through AePS:

  • Banking services:
    • Cash Deposit, Cash Withdrawal, Balance Enquiry, Mini Statement, Aadhaar to Aadhaar Fund Transfer, Authentication and BHIM Aadhaar Pay
  • Other Services offered by AePS:
    • eKYC, Best Finger detection, Tokenization and Aadhaar Seeding Status

How does AEPS work?

  • The AEPS system leverages Aadhaar online authentication and enables Aadhaar Enabled Bank Accounts (AEBA) to be operated in anytime-anywhere banking mode through Micro ATMs.
  • The beneficiary bearing a UID number approaches a business correspondent (BC) with the request to withdraw cash.
    • A Business Correspondent (BC) is an approved Bank Agent providing basic banking service using a Micro ATM.
  • The business correspondent feeds beneficiary’s UID number, fingerprints and amount into the micro-ATM.
  • The Aadhaar server authenticates the beneficiary’s ID and gets his bank account using the ID mapper. Once this is successful, the debit and credit transaction is carried out and then a message is sent to the beneficiary and BC and beneficiary gets his cash.

New guidelines:

  • According to the guidelines, acquiring banks will have to implement a maximum limit of five approved cash withdrawal transactions per customer per terminal per day.
  • Acquirers must implement two-factor authentication for login of business correspondents, agents and merchants at least once a day with one of the factors as Aadhaar based biometric authentication.
  • Cash withdrawal from micro ATMs of AePS has a limit of Rs 10,000 per transaction.


With reference to ‘Aadhar enabled payment system’, consider the following statements:

1. It is developed by the National Payments Corporation of India

2. AePS does not offer cash deposit and withdrawal facilities

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2