RBI issues new KYC norms for payments banks

Mumbai/New Delhi: The Reserve Bank of India (RBI) on Tuesday directed payments banks to get their customers’ information verified by third parties, in a blow to Bharti Airtel Ltd which runs a payments bank with customer data verified by its own telecom business.

An RBI letter sent to chief executive officers of payments banks said “reliance on KYC (know-your-customer) done by telecom companies is not permissible”. Mint has reviewed a copy of the letter.

The third party has to be regulated, supervised, monitored and should have steps in place for compliance with customer due diligence and record-keeping requirements, in line with the requirements of the Prevention of Money Laundering Act, RBI said.

The letter also said payments banks must comply with RBI Master Direction on KYC, which is amended time to time, for all its customers, “including existing customers of telecom companies onboarded by the PB”.

The move comes after Airtel was penalized by UIDAI for allegedly opening payments bank accounts without the explicit consent of users. Both Bharti Airtel and Airtel Payments Bank were barred from conducting Aadhaar-based SIM verification of mobile customers using eKYC process as well as e-KYC of payments bank clients, following allegations that Bharti Airtel was using the Aadhaar-eKYC based SIM verification process to open payments bank accounts of its subscribers without their ‘informed consent’. Following this, Airtel Payments Bank CEO Shashi Arora had resigned.

Until now, telcos such as Airtel had an edge over payments banks from India Post and Paytm, as the old norms allowed KYC done for mobile connections to be extended to opening bank accounts. This allowed telecom operators with payments bank licences to provide bank accounts to all of their existing telco customers with minimum effort and no extra cost. However, the latest direction puts all payments firms on par and could prove to be costly for telcos.

According to industry estimates, currently, KYC could cost companies $1-2 per customer. Mint could not immediately ascertain the financial impact of this move on the companies.

An email sent to Airtel remained unanswered.

“This is going to be an additional operational and cost burden for the telcos,” said Vivek Belgavi, partner (India Fintech Business) at PwC India. While this could be a setback, it is still not late for the telcos to start afresh, Belgavi said. He also added that this could be an opportunity for a third party service providers to emerge.livemint