After releasing guidelines for Non-Banking Financial Companies (NBFC) engaged in peer-to-peer lending, the Reserve Bank of India revised the Know Your Customer (KYC) norms for digital wallet companies, making the guidelines more complex and increasing the cost of operations. 

Mobile wallet companies like MobiKwik, Amazon Pay, PayU, etc. dread that the new stern KYC norms will only act as an impediment to the growing mobile wallet industry and may even decimate many of the small players. 

The Reserve Bank has increased the initial net worth requirement for businesses that offer prepaid payment instruments from Rs. 2 crores to Rs. 5 crores. This net worth must also increase to at least Rs. 15 crores within 3 financial years from the date the business receives authorization. Full KYC wallets will have a limit Rs. 1 lakh and all facilities for fund transfer will be allowed to such wallets. However, these PPIs cannot have more than Rs.  50,000 per month.

The companies are also directed to ensure that KYC compliance of existing users who wish to move money between various wallets and banks through Unified Payments Interface (UPI) is completed by the end of 2017. The consumers who fail to complete their KYC will be allowed to keep only Rs. 10,000 in their digital wallets, with these wallets, termed as ‘minimum- KYC’ wallets. If the minimum-KYC wallets are not converted into ‘full KYC’ wallets within 12 months, then no credit facility will be provided to those consumers. 

Prepaid Payment Instruments or PPIs that can be issued as cards or wallets can be loaded and reloaded with cash or debit to a bank account or through a debit or credit card. PPIs cannot be issued in the paper form except for meal vouchers which will have to be converted to e-format from January 1, 2018. 

The Central Bank has asked for full KYC of each transaction, even the ones as low as Rs. 10,000. The previous KYC norm was limited only to verification of the user’s mobile number. Many digital wallet companies have contested that full KYC of every customer will be a redundant and expensive process that will lead to unnecessary waste of resources. 

The decision has come during the festive season in India and is expected to have a massive effect on the business of mobile wallet players. The major players in the sector will be meeting RBI officials to discuss the guidelines to revise them. The norms on making UPI compulsory for wallet players will also be discussed. 

The RBI laid down these new norms to detect fraud and prevent fake wallet transactions. However, a full KYC norm is feared to threaten the security measures these companies implement as the wallets will have complete personal data of a user. 

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