Launched in 2015 with great fanfare, India’s payments banking ecosystem has taken a serious hit as the Reserve Bank of India (RBI) has halted two of the three existing payments bank from enrolling new customers.
Concerns over the eKYC, or electronically done know your customer process, as well as cases of more than Rs 100,000 being deposited in accounts, have caused the RBI to ask Paytm Payments Bank as well as Fino Payments Bank to halt inducting new customers for the time being.
Airtel Payments Bank, which was earlier asked by the nodal agency not to enrol new customers, got permission to resume the process last month.
Sources said the nodal agency over the past two months had been doing an audit of the two banks and would at the end of it ask them to be in shipshape condition before resuming customer enrolment.
Teething issues as well as fears of non-compliance have stalled the growth of payments banks. According to industry insiders, in the last two months these three banks have not been able to induct more than a few hundred customers owing to the audits conducted by the RBI.
Neither Paytm Payments Bank nor the RBI commented on the matter.
Sources said the RBI wanted to check the eKYC process. Vijay Shekhar Sharma-led Paytm Payments Bank in April said it had more than 100 million KYC wallets.
Concerns over the digital process of KYC and lack of paper trail are the reason the RBI has asked Paytm to halt enrolling customers.
“They managed to have over 100 million KYCs done in a short time. The RBI wants to check if all the right processes were followed and if there had been any discrepancies,” said a source.
The RBI is doing an audit of all bank accounts to check which accounts have more than Rs 100,000. Banking sources said this anomaly had happened mostly in rural areas where banking correspondents have deposited more than the stipulated amount. The RBI wants the two banks to correct this issue.
“As per RBI’s operating guidelines for payments banks the aggregate limit for customer in his/her bank account shall not exceed Rs 100,000. It was observed that a few Fino Payments Bank accounts had deposits in excess of this stipulated amount. In this context, RBI directed Fino Payments Bank to put in place appropriate process to address the operating guidelines on deposit limits in customer accounts,” Fino Payments Bank said in a statement.
The payments bank added that in view of this development RBI has advised them not to open new accounts till the upgraded processes are in place. “Towards this directive, we are in the process of making the necessary product and technology changes,” Fino Payments Bank further added.
The bank however continues to operate all existing accounts of customers. They are also permitted to open minimal KYC wallets. As such its existing customers continue to do banking transactions, deposits, withdrawal, money transfer, bill payments and third party offerings.
Fino had started with a base of 410 branches across 14 states, 25,000 banking points across the country and sees a little more than 15 million monthly transactions.
Airtel Payments Bank just restarted its customer on-boarding services, after it was directed by RBI in January to stop, after the apex bank found that the company was violating operating guidelines around KYC norms. In March, RBI had also imposed a fine of ~50 million on the company regarding violation of norms.
Three years since RBI gave out 11 payments bank licenses of which three — Cholamandalam Distribution Services, Sun Pharmaceutical and Tech Mahindra — surrendered their licences without starting operations. Of the rest, Reliance’s Jio Payments Bank is running its beta tests, India Post has had a soft launch and is yet to start full operations.