RBI full KYC Norms for Digital Wallet Users can kill wallet industry and switch digital wallet users to traditional mode of money transfer through Banks : Prepaid Payment Instrument (PPI) players in the country such as Paytm, ItzCash, Mobikwik and Citrus will soon meet senior Reserve Bank of India officials to discuss certain concerns over the recently announced guidelines. The meeting will discuss the norms on making UPI compulsory for wallet players. Besides, it will discuss the guidelines restricting balance in KYC wallets (non-banking) to ₹10,000.
Reserve Bank of India (RBI) has recently released new guidelines for prepaid payment instruments (PPIs), including digital wallets.
Know your customers (KYC) Norms deterrent to wallet industry
According to sources, wallet players are of the view that the guidelines on the stricter and mandatory Know Your Customer (KYC) norms for users of mobile wallets will be a deterrent to the growing wallet industry and that it might also “kill” smaller transactions.
Full KYC within next 12 months
The RBI, in its guidelines, said the customers wanting to move money between different wallets and banks through Unified Payments Interface (UPI) will have to provide full KYC within the next 12 months failing which they will not be able to transfer money to wallets or to banks. All existing wallet users have been asked to convert to the full KYC format by this year-end.
As per RBI Guidelines, Know Your Customer (KYC), Anti-Money Laundering (AML), Combating Financing of Terrorism (CFT) guidelines, issued by the Department of Banking Regulation (DBR), will be applicable for digital wallet users.
Killing Digital Wallet Industry
RBI asks full KYC for transactions as low as ₹10,000. This will kill the industry and maybe take users back to the traditional mode of money transfers i.e. through banks. Earlier, wallets used to have a minimum KYC format (by verifying the mobile number). Full KYC process is tedious, complicated and expensive for the wallet players and also cumbersome for many people, who have a normal bank account and use wallets for money transfers (remittances).
Increased net worth requirement
RBI has also said that all digital wallets companies seeking license from RBI under the PSS (Payment and Settlement Systems Act, 2007) Act require a minimum positive net-worth of INR 5 crore against INR 2 Crore last year, at the time of submitting application as per the latest audited balance sheet .
Also, the digital wallets must achieve a minimum positive net worth INR 15 crore within three financial years from the date of receiving authorisation.