IRDAI vs RBI vs SEBI: Comparing Aadhaar Masking Regulations Across Financial Sectors

Aadhaar has become a foundational digital identity in India’s financial ecosystem, enabling faster onboarding, verification, and service delivery across banking, insurance, and capital markets. However, the widespread mandatory use of Aadhaar has also increased concerns around data privacy, identity theft, and misuse.

To enhance privacy and prevent misuse, Aadhaar numbers should be masked when used or shared. Regulatory authorities such as IRDAI, RBI, and SEBI have also issued guidelines recommending Aadhaar masking to reduce the risk of identity theft and financial fraud across their respective financial sectors.

This guide covers comparing of various regulations in aadhaar masking by IRDAI,SEBI AND RBI,Key differences and impact on financial service provider

Regulatory Framework: IRDAI, RBI, and SEBI

Although Aadhaar masking is governed by UIDAI at a central level, sectoral regulators interpret and enforce its use differently based on industry risk profiles.

RBI (Reserve Bank of India)

RBI regulates banks, NBFCs, payment service providers, and fintech entities. It mandates Aadhaar masking during KYC, e-KYC, account opening, lending, and payment services. RBI emphasizes minimal data storage, strict access controls, and masking of Aadhaar numbers once verification is complete.

IRDAI (Insurance Regulatory and Development Authority of India)

IRDAI allows insurers to use Aadhaar voluntarily for policy onboarding and servicing. Aadhaar masking is required when storing identity documents, especially during policy issuance, renewals, and claims processing, ensuring customer data privacy throughout the insurance lifecycle.

SEBI (Securities and Exchange Board of India)

SEBI governs brokers, mutual funds, depositories, and investment platforms. Aadhaar masking is enforced in investor onboarding, account modification, and record-keeping, particularly when Aadhaar is used as part of KYC or CKYC processes.

Key Differences and Similarities

Across all three regulators, data privacy and customer protection remain the common goal. Masking the first eight digits of Aadhaar is a shared requirement.

However, differences emerge in implementation focus:

• RBI adopts the strictest controls, given the high-risk nature of financial transactions.
• IRDAI focuses on policyholder protection across long-term data retention cycles.
• SEBI emphasizes secure investor data handling and audit readiness in capital markets.

Despite these nuances, all frameworks discourage unnecessary Aadhaar storage and mandate masking post-verification.

Compliance Requirements for Businesses

To comply with IRDAI, RBI, and SEBI Aadhaar masking regulations, businesses must:

• Mask Aadhaar numbers before storage or internal sharing
• Ensure Aadhaar usage is voluntary and purpose-limited
• Maintain secure access controls and audit logs
• Use compliant Aadhaar masking APIs or automated solutions
• Align internal KYC workflows with UIDAI and sector-specific circulars

Failure to comply can result in penalties, audits, reputational damage, or suspension of operations.

Impact on Financial Service Providers

For financial institutions, Aadhaar masking regulations reshape how onboarding and identity verification are designed. Manual processes are no longer viable at scale.

Banks and fintechs must adopt automated, OCR-based masking to handle high volumes efficiently. Insurers need scalable solutions that work across documents and long-term storage. Capital market intermediaries must ensure masking without disrupting investor experience.

Ultimately, Aadhaar masking is no longer a compliance burden it has become a trust-building mechanism that reassures customers their data is protected.

Harmonizing Regulatory Approaches

While IRDAI, RBI, and SEBI each apply Aadhaar masking regulations based on sector-specific risks, their underlying objective remains the same secure digital identity usage with privacy at the core.

As digital onboarding continues to evolve, there is a strong case for greater standardization across regulatory frameworks, supported by UIDAI-compliant, enterprise-grade Aadhaar masking solutions. For financial service providers, proactively aligning with these regulations today ensures long-term compliance, operational resilience, and customer trust tomorrow.