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RBI extends wallets’ KYC compliance deadline by 6 months

Wallets

The RBI has given wallets another 6 months to comply with KYC requirements, extending from the earlier deadline of February 28, 2019. The RBI said that the extension was granted “based on requests received from various stakeholders” given that alternative systems had to be figured out to replace Aadhaar e-KYC.

Around 70-80% of the wallet user base is yet to comply with KYC norms, the Times of India reported. Mobile wallets were banking on Aadhaar for e-KYC, but were barred from doing so after the Supreme Court ruling on the Aadhaar matter struck down Section 57 which allowed the private usage of Aadhaar.

According to RBI’s master circular on prepaid payment instruments (PPI), users who have not completed KYC will not be allowed to load money into their wallets. PPI operators have also been directed to give a one-time option to users to transfer their outstanding wallet balance to bank accounts without levying any charges.

Wallet companies are now faced with physical KYC compliance, which is more costly than Aadhaar eKYC, and the customer movement to simpler payment options like UPI.

KYC alternatives and dipping transaction volumes

Even after the RBI had introduced KYC norms early in 2018, payment companies had seen a 40-45% decline in transactions. The RBI had allowed eKYC for the first 12 months, after which full KYC would need to be done. At the time, Paytm said that 100 million of its estimated 282 million registered users had completed the KYC process.

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Earlier in February, industry body Digital India Collective for Empowerment (DICE) and Digital Lenders Association of India (DLAI) approached the RBI with alternatives to Aadhaar eKYC. DICE’s recommendations include a request for regulatory approval from the RBI and Finance Ministry for video verification as a form of digital KYC. DICE’s signatories included BankBazaar, SBI Cards and Payments Services, Eko India Financial Services. The 55-member DLAI had also emphasized on the affordability of digital eKYC, and how it reduced cost for disbursing small and short-term loans.

Even insurance companies are working on alternative methods to Aadhaar eKYC as instant policy approvals and some PoS products have suffered. The IRDAI also directed insurers to not seek Aadhaar for KYC, although it may be used if the customer volunteers it.

Also read: End of an era: The RBI issues interoperability guidelines for wallets

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