Cooperative Banks Expand Aadhaar-Based Doorstep Banking Through AePS
India's cooperative banking sector is receiving a push towards digital transformation as the Ministry of Cooperation introduces more affordable onboarding arrangements for banks joining the Aadhaar Enabled Payment System (AePS). The initiative aims to make biometric banking services more accessible, particularly for customers in rural and underserved communities.
Under the revised arrangement, licence fees for onboarding cooperative banks onto AePS will be linked to transaction volumes. Banks will also receive three months of free access to the pre-production environment, giving them time to test the system and prepare their operations before launching services.
The changes are expected to reduce initial technology and compliance costs, particularly for smaller cooperative financial institutions.
Making Doorstep Banking More Accessible
AePS enables customers to access essential banking services using Aadhaar-based biometric authentication. Instead of visiting a bank branch, customers can carry out eligible transactions through authorised banking correspondents and service points equipped with micro-ATMs.
Services available through the system include:
Cash withdrawals and deposits
Bank balance enquiries
Mini statements
Aadhaar-to-Aadhaar fund transfers
Access to eligible Direct Benefit Transfer payments
These services can be especially useful for people living in areas where bank branches and ATMs are difficult to access.
Lower Onboarding Costs for Cooperative Banks
The revised fee structure is designed to make AePS participation more financially practical for cooperative banks. Linking licence fees to transaction volumes can help institutions manage costs according to their actual usage.
The three-month free pre-production period also provides an opportunity to test technical systems, complete integration activities and familiarise staff with the platform before full deployment.
A broader UIDAI framework introduced in August 2025 also simplified the onboarding process for cooperative banks. Under this arrangement, State Cooperative Banks can register as Authentication User Agencies, while District Central Cooperative Banks can access the system through their respective State Cooperative Banks as sub-agencies.
Strengthening Financial Inclusion in Rural India
Cooperative banks play an important role in serving farmers, rural households and local communities. Expanding their access to Aadhaar-enabled services could help bring basic banking facilities closer to customers who face geographical or infrastructure-related barriers.
The initiative also supports the government's broader objective of strengthening digital financial infrastructure across the cooperative sector.
However, successful implementation will depend on reliable biometric authentication, trained banking correspondents, adequate connectivity and strong customer protection measures.
The Reserve Bank of India has also issued directions to strengthen due diligence of AePS touchpoint operators, highlighting the importance of preventing identity-related fraud and protecting customer credentials.
A Step Towards More Accessible Digital Banking
The revised onboarding arrangements represent another step in modernising India's cooperative banking network. By reducing entry costs and simplifying access to digital payment infrastructure, the initiative could help more cooperative institutions extend banking services beyond traditional branches.
For rural customers, the potential benefit is straightforward: easier access to essential banking transactions closer to home. The long-term impact will depend on how effectively cooperative banks implement these services while maintaining security, reliability and customer trust.
