Unique Identification Authority of India (UIDAI) mandating the implementation of Virtual ID from 1 July 2018, the way financial institutions have been verifying information about customers is going to change. Virtual ID is a 16-digit random number mapped with the Aadhaar number. It can only be generated, replaced or revoked by the Aadhaar number holder. It will not be possible to derive the Aadhaar number from the Virtual ID. There will only be one active and valid Virtual ID for an Aadhaar number at any given time.
Why has Aadhaar Virtual ID been introduced?
The move is part of UIDAI’s initiative to put in place multi-layered security to reinforce privacy protection for Aadhaar holders. Virtual IDs allow Aadhaar number holders to share VID instead of their Aadhaar number during authentication, thus reducing collection of Aadhaar numbers by various agencies.
How to generate Aadhaar Virtual ID?
Aadhaar number holders can generate Virtual ID from the UIDAI website (www.uidai.gov.in), Aadhaar enrolment center or the mAadhaar app. User needs to ensure is that their mobile phone number is linked with the Aadhaar database so that they can receive an OTP or one-time password to generate VID.
How to Use Aadhaar Virtual ID?
Aadhar Virtual ID can be used for the purpose of authentication in the same way the Aadhaar number is used. As of now, when a customer has to authenticate himself/herself to avail financial services, he/she has to give the 12-digit Aadhaar number and an OTP that he/she receives on the mobile phone. From 1 July 2018, the customer will not be required to give the Aadhaar number, instead the 16-digit Virtual ID will be provided to the agency or company.
Where to use Aadhaar Virtual ID?
There are two categories of an Authentication introduced by UIDAI,
1) User Agency (AUA)—an entity engaged in providing Aadhaar-enabled services
2) Local AUA, which is the limited KYC category and a global AUA, which will have access to e-KYC using the Aadhaar number.
An AUA may be a government, public or a private legal agency registered in India which uses Aadhaar authentication services provided by UIDAI.
All banks-commercial banks, payment banks, regional banks, rural banks, cooperative banks, small finance banks; life insurance companies and National Payments Corporation of India (NPCI) have been categorized as global AUAs whereas prepaid payment instruments (PPIs), non-bank financial institutions (NBFCs), telecom operators and non-life insurance companies are amongst those classified as local AUAs.
That means if you want to authenticate yourself to avail services of any of these local AUAs, you will have to use Aadhaar Virtual ID. However, the use of Virtual ID for availing services of global AUAs is optional for users.
However, the global AUAs too have been instructed to upgrade their systems to provide authentication services using Virtual ID, said UIDAI in a circular issued on 6 June.
 mandating the implementation of Virtual ID from 1 July 2018, the way financial institutions have been verifying){kind=link}