The remark comes against the backdrop of a spate of multi-crore bank frauds, including the one linked to celebrity designer Nirav Modi, who has been accused of defrauding the state-run Punjab National Bank (PNB) to the tune of over Rs 11,000 crore.
Aadhaar is not a catch for all frauds, said Justice DY Chandrachud, one of the five judges hearing a clutch of petitions challenging the programme.
"When loans are given by a bank, you know the person. The loan does not become a Non Performing Asset (NPA) unless banks are hand-in-glove. NPAs occur because banks haven't taken due diligence, which ought to have been carried out," remarked Justice AK Sikri, another judge on the constitution bench.
Attorney General KK Venugopal agreed with the court's view, saying, "If there was due diligence at the bank level, incidents like Nirav Modi would not have happened".
The billionaire jeweller is accused of gaining fraudulent letters of undertaking from one of the PNB branches in Mumbai to raise overseas credit from other Indian lenders.
Defending the government's decision to link bank accounts with Aadhaar, Mr Venugopal argued that the move has prevented money laundering to the extent of thousands of crores, identified shell companies and curbed benami transactions.
Asserting that Aadhaar doesn't violate the right to privacy, Mr Venugopal said, "What's the use of fundamental right to privacy when people are starving?"
His comments drew a sharp response from the court that said a person cannot give up one right to available the benefits of another.
"If we go by your logic, can a person say give me food, clothing and shelter, and I will be your slave," asked Justice Sikri.
The response from the attorney general was brief: "Slavery has been abolished long ago".