Prepaid Payments Instruments (PPI) should be “thoroughly reviewed” and the maximum outstanding limit of Rs 1 lakh in PPI accounts should be “substantially” revised upwards. This was recommended in the FinTech report by the Department of Economic Affairs, under the Finance Ministry.

While PPI accounts are a “convenient” way of making routine payments, restrictions on them have “hindered” their expansion, the report said. The 1 lakh amount limits consumer benefits and “reduces the ability of PPI issuing firms to onboard customers,” it said. Noting that UPI linked to bank accounts did not have such restrictions, it called for “liberalising” the PPI system. It added that since deposits made into PPI accounts do no earn any interest, “apprehension that these might replace the banking system may not be well founded”.

Allow video KYC for fintech companies

The report also emphasised on the need for alternate KYC (know your customer) options  including video KYC  for fintech companies in India. It also said that validated documents on DigiLocker can be used for KYC purposes. The report suggested that these documents can be verified by “service providers with prior customer consent”.

It noted that fintech firms were “adversely affected” by the Supreme Court’s 2018 Aadhaar judgement which prevented them from doing online KYC using Aadhaar cards. It said that “using Aadhaar was a sound system with considerable efficiency and convenience [for fintech companies]”.

An RBI committee has previously recommended video KYC

An RBI Committee – headed by former SEBI chairman UK Sinha – had recommended using Video KYC – via actual video calls – to replace current KYC  norms in its report on domestic micro, small and medium enterprises (MSMEs).

Mobile wallet companies have given inputs to the RBI on video KYC as a possible way to eliminate the physical leg of the current KYC process. After the RBI issued its guidelines on KYC last year, several wallet firms have tied up with retailers and other companies to ensure in-person KYC of users, but that has turned out to be expensive. Before that, in February, industry body Digital India Collective for Empowerment (DICE) and Digital Lenders Association of India (DLAI) had approached the RBI requesting for regulatory approval from the RBI and Finance Ministry for video verification as a form of digital KYC.

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