srar018 Paym E-KYC Rules: India’s Payments Banks Trip On E-KYC Rules
‘| India’s Payments Banks Trip On E-KYC Rules
Vishwanath Nair
Wowsshyst
Published: Aug 01 2018, 5:56 PM
Last Updated: Aug 01 2018, 8:46 PM
hnps:hwwn-bloombergouint.comfbusiness/2018/08/0 india payments-banks-tip-on-ekye-rulesgs imojnO anesrar018 Paym E-KYC Rules: India’s Payments Banks Trip On E-KYC Rules
The Reserve Bank of India has barred atleast two payments banks from accepting
new customers. The reason, say officials in the know, is the lack of strict compliance
with a couple of banking provisions - including not just banking-related Know Your
Customer norms but also provisions under the Prevention of Money Laundering Act.
Fino Payments Bank has been barred by the Reserve Bank of India from adding new
customers. That’s because some customer accounts were found to have more than
the Rs 1 lakh deposit limit permitted to payments banks, said Fino in a statement to
BloombergQuint.
“As per RBI’s operating guidelines for payments banks the aggregate
limit for customer in his/her bank account shall not exceed Rs 1 lakh. It
was observed that a few Fino Payments Bank accounts had deposits in
excess of this stipulated amount.”
The payments bank said that it is in the process of upgrading its processes and
technology to support these changes. Meanwhile, all existing customer accounts
continue to operate, it added.
The problem at Paytm Payments Bank seems larger.
On Wednesday, Mint had first reported that Paytm Payments Bank had been asked
by the RBI to stop accepting new customers immediately. This was because the
made observations about the way in which Paytm Payments Bank was acquiring“
customers and its adherence to the KYC norms specified by the regulator.
hiups:www-bleombergauint combusiness!2018/08/01/indias-paymonts-banks-tp-one-kye-ulesigsimO}hO anesrar018 Paym E-KYC Rules: India’s Payments Banks Trip On E-KYC Rules
In e-KYC, the bank and the customer are not face to face and the bank may allow the
customer to open a bank account using a one-time-password (OTP) authentication.
To be sure, payments banks do also conduct a biometric verification of the customer
within a year of opening the account, failing which, the bank account would cease to
function.
But that’s not enough.
According to a former RBI official who spoke to BloombergQuint on the condition of
anonymity, typically non-banking payments companies used identity proof and
proof of address as KYC documents. However, for banks, the KYC goes a step further
than that, the former central banker said.
RBI’s KYC guidelines specify that to allow a customer to have a functioning bank
account, the bank must collect officially valid documents which could be an Aadhar
card, PAN card, driver's licence, passport or utility bills.
‘And under PMLA the involvement of a banking official in on-boarding a new
customer is necessary.
Since Paytm did not follow these processes fully, it was asked to stop adding new
customers.
A senior official at PayTM, while speaking on conditions of anonymity, said that the
regulator was in the process of reviewing PayTM's processes. The official said that
the confusion was due to ambiguity in e-KYC norms of the regulator.
No official statement was forthcoming from Paytm.
To be sure, PayTM Payments currently does not allow customers to complete e-KYC
on its mobile application or website. The bank asks its customers to either physicn''v
submit their KYC documents at a PayTM outlet or offers to send a representati\
the bank to the customer's location.
hiups:www-bleombergauint combusiness!2018/08/01/indias-paymonts-banks-tp-one-kye-ulesigsimO}hO anesrar018 Paym E-KYC Rules: India’s Payments Banks Trip On E-KYC Rules
“Banking is a highly regulated industry. For the regulator compliance is
sacrosanct. Once you upgrade yourself into a bank, there is no compromise on
the compliance with regulation. There are some robust regulations in place for
the sector. The RBI won't shy away from levying a penalty if it finds issues with
compliance. It is more out of prudence that some of these companies are being
asked to pause their business activities and ensuring that they follow the
norms.”
Naresh Makhijani, partner, KPMG
This is not the first time that payments banks are facing restrictions placed by RBI.
Earlier this year, the banking regulator imposed a penalty of Rs 5 crore on Airtel
Payments Bank for breaching operating guidelines and Know Your Customer norms.
The bank allegedly opened payment bank accounts of mobile consumers without
their informed consent. The bank allegedly used customers’ Aadhaar number to do
so. This first prompted the Unique Identification Authority of India - the custodian
of Aadhaar to temporarily bar the bank from from conducting Aadhaar-based the e-
KYC and subsequently penalised it. This was followed by RBI action.
In July, Airtel Payments Bank confirmed that it had received necessary approvals to
resume acceptance of new customers.
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