Users of prepaid payment instruments (PPI) such as mobile wallets will have to complete the KYC requirements by February 28 as the Reserve Bank of India has refused to extend the deadline any further.

Those who do not comply with the KYC norms will not be allowed to load money into their respective wallet accounts or carry out remittance-based transactions. They will also not be allowed to transfer the cash in the wallet account to their bank accounts.

However, users will be allowed to use the balance amount in their respective wallets to pay for goods and services. Once the balance is exhausted, the user will not be able to load cash again until the KYC norms are complied with.

“Sufficient time has already been given to meet the prescribed guidelines. The guidelines are designed to strengthen safety and security of transactions and customer protection,” RBI Deputy Governor BP Kanungo said, adding that KYC requirements are necessary to usher in inter-operability.

The RBI had initially given time till December 31, 2017, to make PPI accounts KYC-compliant. This was extended to February 28 after a number of players sought more time as they felt that the KYC norms were tough.

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While the RBI did not disclose how many PPI users have completed KYC norms, Kanungo added that those users who want to withdraw the balance amount (in the wallets) can close their PPI account and get the money transferred into their bank accounts.

According to industry estimates, more than 90 per cent of mobile wallet users have not fulfilled KYC norms. “There are about 55 companies in this space, including Paytm, Citrus and Mobikwik. They could see a dip in transactions and user base from next month,” said an industry expert.

Many PPI issuers, under its umbrella body Payment Council of India, had approached the RBI recently requesting the banking governing body to relax the full KYC norms for people who do small-value transactions (below ₹10,000), which account for the bulk of the transactions at present.

Vijay Kalantri, Founder of The Mobile Wallet, said, “PPI is the entry point for any one to go digital and if they (the RBI) put so many restrictions, it will create a hindrance among users. There should be a minimum KYC, which validates the name and mobile number and where the user will get an OTP.” He added that the move would lead to a massive drop in the number of wallet users, and many do not want to carry out full KYC.

Negative fallout

“The RBI’s move will have a negative fallout. After demonetisation, they are going for de-digitisation and this will only further encourage cash transactions so the whole motive of encouraging the digital economy is being defeated,” said an executive representing the payments industry..

He added that about ₹15,000 crore of transactions are being conducted every month through wallets, of which, about ₹10,000 crore is remittance, where the average ticket size is less than ₹3,000 per transaction.

“These are migrant labourers who came to digital platform as there was no KYC requirement. They will be impacted the most. We had requested the RBI to build a bridge between ‘minimum KYC’ and ‘full KYC’, but it has forced users to give all the details, which we think should be left to users to decide,” he added

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