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Vodafone Idea seeking merger for its M-Pesa wallet to comply with RBI rules

By Raidarmax (Own work) [<a href="http://creativecommons.org/licenses/by-sa/3.0">CC BY-SA 3.0</a>], <a href="http://commons.wikimedia.org/wiki/FileAn_M-Pesa_Payment_Till.JPG">via Wikimedia Commons</a>

Vodafone Idea is looking at merging its payments wallet, Vodafone M-Pesa Ltd (VMPL), with an associate or third-party firm, the company said in Q4 results, released on Monday. The company wants to hive off VPML because it also owns 49% of Aditya Birla Idea Payments Bank Limited, having been created by the merger of Vodafone India with the Aditya Birla-owned Idea Group in 2018. RBI guidelines state that a single promoter group cannot have a payments banking business in one entity and prepaid payment instruments (PPI) business in another. “Based on various discussions, RBI had initially permitted these two entities to carry on the business until December 31, 2018 which was later extended to March 31, 2019,” the company wrote. In the meantime, it has applied for an extension of its prepaid payment instrument (PPI) license.

Mobile wallets face KYC compliance deadline

Wallet companies have been conducting paper-based KYC since the Supreme Court banned private entities from using Aadhaar last year. In February, the RBI gave mobile wallets another six months to comply with KYC requirements, extending the previous deadline of February 28. 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-based e-KYC. Around 70-80% of the wallet user base was yet to comply with KYC norms at the time. According to RBI’s master circular on prepaid payment instruments (PPI), users who have not completed KYC will not be allowed to add money to their wallets.

For this reason, and the arrival of more efficient digital payment platforms such as the Universal Payments Interface (UPI), the use of mobile wallets has plateaued in India. The number of transactions involving wallets decreased 12.8% month-on-month to 345.03 million in February 2019. The amount transacted decreased 10% to Rs 14,279 crore from the previous month, and was only 9% higher than in the same month in 2018. Meanwhile, the total number of UPI transactions in April 2019 was around 4 times higher than in the same month last year, and the amount transacted was 5.3 times higher than in April 2018.

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