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Wednesday, August 24, 2016
KYC Norms for India Post Payment Bank
Just a few months before the new crop of payment banks start their operations, their chiefs are a worried lot.
The banking regulator's ask in terms of meeting the Know Your Customer (KYC) norms has put them at par with traditional banks, and firms are concerned that the preference for "paper-based" KYC will be a cost-intensive and time-consuming exercise — and therefore a major impediment to the growth of the new age banks.
Paytm payment bank's CEO Shinjini Kumar told ET that the industry is very "aggrieved" with the Reserve Bank of India (RBI) asking all entities to adhere to the centralised KYC system instead of just relying on the Aadhaar-based eKYC for payment banks. "We are grappling with that problem right now and we are talking to different people. We are hoping that there will be some understanding. Anyway our accounts are capped at Rs 1,00,000. There should be no reason why eKYC should not be the only way to do KYC. It is also digital and more authentic."
Chiefs of Aditya Birla Idea Payments Bank, Sudhakar Ramasubramanian and Vodafone M-pesa payments bank Suresh Sethi also aired similar concerns to ET. They argue that payment banks do not have the same manpower to collect paper-based KYC like traditional banks and given that they are capped at a balance Rs 1,00,000, they do not share the same amount of risk. While RBI had earlier accepted eKYC as a means for customer authentication at the time of opening accounts, the new norms mandate a common KYC across all financial services entities for which detailed KYC is required to be collected and uploaded as a paper form to a central KYC repository — Central Registry of Securitisation Asset Reconstruction and Security Interest of India, or CERSAI.
The idea is to streamline the KYC process and avoid duplication of KYC for customers at multiple agencies. But, for payment banks to be cast under the same net, it means that instead of just relying on the biometric based eKYC they will have to collect more details of their customers and upload them to the central registry. Sudhakar who is the CEO (designate), of Aditya Birla Idea Payments Bank said that in the case of payment banks a phased approach towards KYC will be better received since the whole idea behind the payment banks is towards financial inclusion.
"If we have too many restrictions for someone who keeps Rs 5,000 in the account, it could prevent many of the unbanked from experiencing the benefits of financial services. KYC norms can be applied in a layered manner as the customer's balance and transactions increase," he said.
Digital KYC will help ease the "entry barrier" for such people along with being a more authentic means of KYC than a physical KYC. "Currently, over 90% of all retail transactions are through cash in the country, if these transactions have to be converted into the electronic format, banking will have to be relived from some of these troubles," he added.