The Reserve Bank of India has said that customers will not lose money from mobile wallets even if companies remain non-compliant to its full KYC (Know Your Customer) guidelines after the deadline expires on Tuesday. But the assurance comes with some caveats.

PPI (Pre-paid instrument) issuers not obtaining KYC inputs of their customers within the stipulated deadline will not lead to loss of money for customers, BP Kanungo, deputy governor of the RBI said in a press briefing. But reloading on the wallet and remittances can only resume after completing the KYC requirement. Users will be able to undertake transactions for purchases with the available balance in the wallet. So you can still pay for your Uber rides and order food online with the balance amount left on your wallets even after the KYC deadline expires but you can’t add any more money to it.

Full KYC requires users to link their wallet or PPI account with their Aadhaar number. Some other documents like residential proof are needed too.

The RBI had initially given time till December 31, 2017, to make PPI accounts KYC-compliant. This was extended to February 28 after a number of players sought more time as they felt that the KYC norms were tough.

It is a necessary step to pave the way for interoperability between PPIs, bank accounts and cards in a phased manner, said Kanungo.

While the RBI did not disclose how many PPI users have completed KYC norms, Kanungo added that those users who want to withdraw the balance amount (in the wallets) can close their PPI account and get the money transferred into their bank accounts.

According to the RBI, there are 55 non-banking PPIs operational right now.

PPI transactions rose in December

For the month ending December 31, 2017, number of transactions using Prepaid Payment Instruments (which includes both Mobile Wallets and PPI Cards combined) increased by 35% to 319.9 million as compared to 236.2 million in November 2017, and grew 23% compared to 261.1 million in December 2016, according to data from the Reserve Bank of India. The amount transacted went up 8% month on month to Rs 14,334 crores from Rs 13,221 crores, while grew 47% year on year from Rs 9,770 crores in December 2016.

Much of the growth happened in Mobile Wallets, which increased 54.5% month on month to 288.4 million transactions from 186.7 million, and up 35% year on year from 213.1 million transactions in December 2016. Amount transacted using Mobile Wallets grew 34% month on month to Rs 12,568 crores from Rs 9,388 crores, and grew 69% year on year from Rs 7,448 crores in December 2016.

End of the road for mobile wallets?

Mobile wallet companies have raised alarm that this move could seriously cripple them. According to a report on the Economic Times, the total number of customers who have submitted their KYC details is in ‘low single-digit’ percentage.

The report quotes the chief executive of a payments company speaking anonymously, “If these norms are implemented in full force, the entire industry, which handled around Rs 12,000-crore worth of transactions in December, will be facing a major crisis.”

The Payments Council of India (PCI), the representative body for digital payment players, as well as various other industry stakeholders, have spoken about how the full KYC requirements would possibly hamper mobile wallets.

Committee members said that transactions below Rs 10,000 form 90% of total transactions. They stressed that full KYC for these low value transacting users would deter them from wallets. The committee said that it wants proportionate KYC, where the requirements should depend on the risk and benefit of the transaction.