What Is An AEPS Transaction: Full Form, Process & Aadhaar-Based Banking

AEPS has become one of the most essential strategies for promoting financial inclusion in India, particularly in rural and semi-urban areas. AEPS allows anyone with an Aadhaar number and a bank account to access basic banking services without having to visit a branch.

Story of Kavita's AEPS transaction:

Aman, her younger brother, frequently assists 38-year-old Kavita, who owns a kirana shop close to Kanpur, with UPI and mobile banking. "Didi, Aadhaar se ₹2,000 mil sakta hai?" a daily wage worker asks as he enters the room one day. Kavita says, "Yahi toh AEPS hai," but Aman is perplexed. Bank details, Aadhaar number, and thumb impression, that's all! Cash in hand in a matter of seconds.

"Phir ATM ki zarurat hi kya hai?" asks Amam.  Any Bank Correspondent may make cash withdrawals, according to Kavita: "Just Aadhaar, no card, no PIN."

Aman discovered the potential of AEPS that day, as well as how it helped Kavita get insurance claims and an emergency medical loan for her spouse in times of need. Let us delve deeper into these topics and explore how AEPS, insurance, and medical loans are impacting financial access in India.

What is AEPS?

AEPS stands for Aadhaar Enabled Payment System. It enables bank customers to utilise their Aadhaar number and fingerprint to execute basic banking tasks via a micro-ATM or banking correspondent (also known as a BC agent). 

It was designed by the National Payments Corporation of India (NPCI) and is particularly useful in distant locations.

Example: A farmer in Bihar visits a local shop with an AEPS machine, gives his Aadhaar number and fingerprint, and withdraws ₹2,000 from his bank account without using a debit card or visiting a bank branch.

AEPS Transaction Features

The Aadhaar Enabled Payment System (AEPS) enables consumers to conduct basic financial transactions using their Aadhaar number and biometric authentication, without the requirement for a debit card or passbook. The table below highlights the important features.
 

AEPS has made banking services more accessible, particularly in rural and semi-urban regions, by allowing secure, cardless transactions that are directly connected to Aadhaar.

How Does AEPS Work? Step-by-Step Process

The AEPS process is simple and accessible:

1. Visit a nearby BC agent or micro-ATM machine.
    
2. Provide your Aadhaar number and bank name.
    
3. Select the transaction type (withdrawal, deposit, etc.).
    
4. Authenticate with your fingerprint.
    
5. The transaction is processed, and a receipt is generated.

Example: Shyam, living in Lalitpur village, had ₹1,670 in his account. He used AEPS to withdraw ₹1,500 and check his balance. Post-transaction balance: ₹170. Time taken: 40 seconds.

AEPS vs Traditional ATM

AEPS and ATMs both enable cash transactions, but differ in access and authentication methods.
 

While ATMs remain popular in metropolitan areas, AEPS provides a more inclusive option by allowing cardless, biometric-based transactions, which improve access in rural areas.

Benefits of AEPS for Common People

AEPS was launched to empower people in remote areas where bank branches and ATMs are rare. Its main advantages include:

• No Card Required: Aadhaar number and fingerprint are enough.
   
• Low Transaction Cost: Ideal for small withdrawals.
   
• Financial Inclusion: Brings banking to the doorstep.
   
• Safe and Secure: Uses biometric verification.

Example: Kavita helped over 50 villagers during lockdown by enabling them to withdraw ₹500–₹2,000 through AEPS.

Benefits of AEPS

AEPS provides convenient, cardless banking services that are especially useful for rural and remote users.
 

By bringing banking to the doorstep, AEPS ensures faster, safer, and more inclusive access to essential funds.

What is an Insurance Claim? Full Explanation

While talking about AEPS, Aman remembered that their neighbour Raju recently filed something called an insurance claim when his bike got damaged. So he asked:

“Didi, insurance claim kya hota hai?”

Kavita explained: An insurance claim is a formal request made to an insurance company asking for compensation or coverage under a policy, for example, health, motor, or life insurance.

Types of Insurance Claims:

• Health Insurance Claim: for hospital expenses.
   
• Motor Insurance Claim: for car or bike damage.
   
• Life Insurance Claim: for death-related benefits.

Example: Raju filed a motor insurance claim of ₹7,500 for repairing his damaged scooter after an accident.

Types of Insurance Claims 

Insurance claims enable policyholders and beneficiaries to get cash compensation for insured incidents.
 

Understanding the different claim types helps individuals choose the right coverage and know what financial protection to expect.

What is a Medical Loan? Why Is It Important?

During their discussion, Aman also asked, “What if someone doesn’t have health insurance? What options do they have for urgent treatment?”

Kavita replied: That’s where medical loans come in.

A medical loan is a personal loan taken specifically to cover medical emergencies like surgeries, hospitalisation, or treatments that are expensive and need immediate funding.

Key Features of Medical Loan:

• Instant approval (in many cases)
   
• No collateral required
   
• Tenure from 6 months to 5 years
   
• Loan amounts range from ₹10,000 to ₹10 lakhs

Example: Kavita’s cousin required heart surgery costing ₹3.5 lakhs. With no insurance, they took a medical loan from a digital lender with an EMI of ₹7,000/month.

Medical Loan Snapshot
 

Conclusion

By the end of their discussion, Aman understood how AEPS made banking accessible in villages, how insurance claims work as financial protection, and how medical loans serve as a last resort in emergencies. 

“Didi, tumhare dukan pe AEPS machine hai, aur tum toh health aur finance expert bhi ban gayi ho!”

Kavita replied, “Sahi bola, Aman! Jab knowledge ho, toh financial stress kam hota hai.” AEPS, insurance, and emergency loans are not just services; they are lifelines.

FAQs

Q1. Can anyone use AEPS services?
Yes, if you have an Aadhaar-linked bank account, and biometric verification is successful.

Q2. Is AEPS safe to use?
Yes, it uses biometric authentication, making it very secure.

Q3. How is a medical loan different from a regular personal loan?
Medical loans are categorised and processed faster for health-related expenses, often at slightly lower rates.

Q4. Are insurance claims guaranteed?
Claims are approved if policy terms and documentation are correctly fulfilled.

Q5. Can I apply for a medical loan online?
Yes, many fintech and banks allow instant medical loan approval online.

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LoansJagat Team

We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?