The deadline for compliance with the KYC norms for the e-wallets ended yesterday February 28. From March 1, the users of digital payments platforms, like Paytm or Mobikwik will not be able to transfer funds into their wallets unless their full KYC details have been submitted as per RBI guidelines.
The Reserve Bank has not listened to the pleas by the Payments Council of India to exempt payments up to Rs 10,000 from the full KYC compliance. RBI has stood its ground that it does not find any difference between these typical payment banks and the normal banks which are in any case mandated to follow the KYC norms in the case of all their customers, small or big. The restrictions on the e-wallet operating companies could be severe if they do not fall in line.
This decision is definitely going to have an effect on the digital payments ecosystem since the e-wallet operators had not provided the infrastructure required to handle the KYC compliance. It may take them time and cost them money to be fully prepared to achieve full compliance. But at the end of the day, the RBI has to take these stern measures to ensure that the genuine users are protected while the unscrupulous ones are kept away from the system. No one is disputing the long-term benefits of such checks and balances in the financial ecosystem in India.
RBI has made it clear that those account holders who have not submitted the requisite documents and have not got their biometric ID verified will not be permitted to make transfers out of their bank accounts to the digital wallets. However, the funds already lying in their credit within the e-wallets can be continued to be used for making payments through it.
There is a report that hardly 10% of the e-wallet customers have, so far, completed the KYC verification process. The operators of these platforms definitely stand to lose.