India’s Aadhaar framework opens new doors for cooperative banks, research reveals

By Puja Sharma

Aadhaar framework to fast-track rural banking access

When Aadhaar was launched, it was more than a 12-digit number; it was a gateway to opportunity. Over the years, it has become the backbone of welfare delivery and digital banking. In 2025, Aadhaar is expanding its reach into cooperative banks, a shift that could transform how millions of rural Indians access money and essential services.

That expansion is backed by sheer numbers. In August 2025 alone, Aadhaar recorded over 221 crore authentication transactions, a 10% increase from the same month last year. Face authentication, a newer feature, is also seeing explosive growth; transactions tripled year-on-year, crossing 18 crore in a single month. From welfare delivery to banking and telecom, Aadhaar’s role as the country’s digital ID backbone is becoming harder to ignore, and for cooperative banks now joining the ecosystem, this momentum offers a ready-made digital highway to serve their customers faster and more securely.

The Unique Identification Authority of India (UIDAI) has rolled out a new framework to bring 380 cooperative banks into the Aadhaar fold; 34 State Cooperative Banks and 352 District Central Cooperative Banks will now be able to use Aadhaar-based authentication and eKYC. For decades, cooperative banks have been the financial anchor for rural households; yet they often struggled to keep pace with commercial banks in terms of technology. With Aadhaar integration, they can finally move towards faster, simpler, and more reliable services.

The design is clever in its simplicity. Only the State Cooperative Banks will be registered with UIDAI as Authentication and eKYC User Agencies; the District Central Cooperative Banks can ride on that infrastructure instead of building costly systems of their own. This means less duplication, fewer expenses, and quicker adoption. For institutions that have long operated on thin margins, this is a practical lifeline.

For the customer, the difference will be felt in very real ways. Think of a farmer who wants to open an account in her local cooperative bank. Until now, she might have had to bring stacks of paperwork, wait weeks for approvals, and even face rejection because of missing documents. With biometric eKYC and Aadhaar-based face authentication, her account can be opened in minutes. Subsidies for seeds or welfare benefits can be credited directly into that account. For her, banking is no longer a maze of forms and signatures; it is simple, immediate, and trustworthy.

The framework also brings cooperative banks into the Aadhaar-enabled payment ecosystem. Services like AePS and Aadhaar Payment Bridge allow rural customers to send and receive money easily, even without smartphones or internet connections. For daily wage earners, pensioners, and self-help groups, this is not a small convenience; it is a new level of financial security.

Of course, challenges remain. Data privacy and cybersecurity must be taken seriously. Cooperative banks, many of which have limited resources, will need strong training and support to ensure Aadhaar-linked services are safe from misuse. This will require vigilance from UIDAI, NABARD, and the Ministry of Cooperation; a framework on paper is only as strong as its execution on the ground.

Still, the intent is clear. Aadhaar’s reach is no longer limited to big banks or urban centres; it is extending to the grassroots through cooperative institutions that people trust. If implemented well, this could be one of the most significant steps in closing the financial inclusion gap for India’s rural population. For millions who rely on cooperative banks, this is more than a digital reform; it is a promise of dignity, access, and opportunity. Aadhaar, in its new avatar, is not just modernising banks; it is humanising finance.